We are a Year Old

For many businesses, the first year can be a make or break. Fifty percent of businesses die in their very first year of operation. Most businesses get started because the founder generally sees either a lacunae in the current setup which he hopes to fill or believes he can offer a better product compared to those that are currently available.

It doesn’t matter how good a product is or how big a gap the founder thinks he is filling if the market doesn’t validate him and the way of validation is achieved by being able to sell the idea to the public for a price. 

Financial Advisory is dime a dozen and yet there is a real dearth of quality financial advice. The biggest sellers of Mutual Funds for example are not Financial Advisors but Banks. Selling Insurance and Mutual Funds is part and parcel for most Private Bank employees to the extent that many would rather push investors who come to place a fixed deposit to either a Unit Linked Insurance Plan or a Mutual Fund. 

Technology is seen as a one stop solution for all things including finance. Robo Advisory is the next big thing in finance with personalized solutions being provided to clients at a fraction of the cost that traditional advisory shall cost. Think of it as a Low Cost Airline vs a Full Service Airline.

While low fees is definitely a great appeal, the issue when it comes to finance is our inability to hold our emotions in check when the chips are down. Asking a computer to solve it isn’t going to help. 

In March 2020, I saw fear and panic envelop as markets cracked like no other time before with the Index down 40% from a peak it had hit at the start of the year. My own portfolio was down more than 25%.

When markets fall big time, even experienced professionals tend to panic. Today, it’s all nice to wonder what if one had bought during the fall but at that time, the question was whether to take the hit and move on or wait and see how things may unfold. 

To try and get a better understanding I tweeted 

If 80% or more of your assets are invested into markets, how are you dealing with the current panic. DM me if you don't want reply to be Public.

Just trying to garner views as a case study for the future. Thanks

— Prashanth (@Prashanth_Krish) March 21, 2020

What I could see was real pain and pressure felt by many. This was also the time that Analysts on TV were warning about even more pain that could be coming. A famous technical analyst using an esoteric model of analysis even painted a picture of Nifty going down to 2000. 

Looking back at the DM’s I don’t think I advised many to buy more but I did advise to hold on for now, the pain has been seen and I personally felt that markets may not tumble down the rabbit hole as many seemed to predict.

If there was any doubt on what space Portfolio Yoga wanted to occupy, this episode gave the clarity it required. While the initial thought was to take the Registered Investment Advisor License, the new rules that were being circulated meant that it was not worth going down that road. 

One could not have asked for a better first year in terms of how the market has behaved. Even a lousy strategy would have worked wonders and it’s not surprising that the Portfolio Yoga portfolio’s had a dream run.

We started with just one portfolio – Portfolio Yoga Multicap Momentum Portfolio and have over the months expanded the offering to include Portfolio Yoga Large Cap Momentum Portfolio, High Price Portfolio and the Coffee Can styled Quality Portfolio.

All this at a simple and single price that we felt was something that would be affordable by those who may not have a large capital to start with but required a bit of hand-holding and a good portfolio to start their investment journey.

One of the differences we feel that we offer compared to others is the ability to call us if you wish to get a better understanding of the services or even the market. This meant getting in touch with more than 50 of our clients and even meeting a few of them personally. 

Also, did I mention that we even today are the only guys that offer partial refunds if one is not satisfied with the services anytime after subscription? Love to say that just 8 of the total of 294 who have subscribed to us wanted a refund. 

One of the easiest ways to sell is to talk about performance. In bad years, everyone wants to talk about the process while in good years, it’s all about performance and how great their stock picking ability has been. While we write a monthly newsletter to clients, we have never talked about our performance. 

Our performance is not shitty but is not the best either. But the reason not to talk about performance is because it in a way sets expectations that may or may not be matched in the future. In 2017, I distinctly remember small cap fund managers tomtomming their returns with many comparing against Nifty 50. Over the next couple of years, it was just one way down for many with drawdowns to the tune of 50% or more. Clients panic at the exact wrong time because they got sold an idea without selling them on the risks.

Momentum is a good strategy and has an outstanding year and half. But at some point the returns shall wane even as the returns of some other factor will shine. Momentum is not some free lunch in the market. 

After a strong start, client growth has kind of tapered off but that is what happens even when a spaceship is launched, so all izz well 🙂

What Next?

In the world of factors, the only gap that remains from Portfolio Yoga stable is the “Value Portfolio”. Unfortunately the quantitative approach is not the most ideal given the nuances when it comes to Indian stocks & their promoters. We are actively working with someone who has deep insights into Value Investing to bring a Discretionary Value Portfolio out. 

With Corona on the wane and a new office now setup, the hope is also to attract a few youngsters to work with us to bring out deeper insights into stocks and market. In the meanwhile, we now have a presence on the Smallcase platform with our Large Cap Momentum Portfolio.

To better days ahead. Onwards & Upwards.