Every body’s life is filled with various experiences, and it is some of these experiences that makes us more mature in our thought process.
I love my profession of financial advisory & it gives me a great satisfaction after seeing that my advice has benefited my client. This is not only because i want to be the best but because every return in my client’s portfolio gives me an opportunity to proceed further with my client. Sadly, most of us judge our adviser’s only by the amount of returns that they make and i am a firm believer that an adviser is hired to make gains and not losses. At the same time an investor needs to verify that have these returns been made because of the adviser’s “PROFICIENCY” & “NOBLE INTENTIONS” or just by “LUCK”
The reason i am writing today is to give a perspective about what is a right advice and what is a wrong one, because sometimes it does happen that a wrong advice gives more return that the RIGHT ONE. I would hereby also request to all the people who are reading this post to respond with their views.
In the month of March 2009, i met a client of mine who had some liquid surplus to be parked for a period of 6 -12 months. The points that played over my mind were the elections were round the corner, economic data was not good, sentiments were low and even if i ignore all this, EQUITY is not meant for one year and hence i suggested this client a short term income fund and an Arbitrage Fund.
The client did not invest with me and instead went with the advice of another by putting his money in Reliance Growth Fund. Now just to let you know “Reliance Growth Fund” is primarily a Mid cap fund.
Now i met this client last week and he told me that if he would have followed my advice he would not have made any substantial returns and by following the other adviser, he made 52% gains in just 3 months.
I was really shattered on hearing his lines and was recollecting “An Advisers Job is to identify the best opportunity for his client keeping in mind the following:-
- Risk appetite
- Time Horizon
- Market scenario
- Future market expectation
- Asset class characteristics
The only things i used were my “Noble Intention” and the “Proficiency” which i have built up with the support i got from my organization. Now i believed that Equity investment in Indian markets in March 2009, for a period of 6 – 12 months was not the right choice.
I am counting on each one and would humbly request to respond whether i was WRONG or RIGHT because if was wrong then i need to change my beliefs about “ADVISING WITH NOBLE INTENTION”.
Also for everybody’s sake, if he had chosen to invest in my advised places he would have made a return pf 1.85 % in the Arbitrage and almost 0.45 % in Short term income fund.
PLEASE COMMENT SINCERELY !!!!!!!!!!
Anil Budhraja
anilbudhraja@yahoo.com
9811078787
Dear Anil,
This is not about doubting your intentions behind your advice.
first dont take it too seriously (i mean personal)
you had good intentions but probably by 15 th march,2009 the equity markets had broken upwards the simple 20 week average which they had not done so since january 2008.markets had consolidated for three months and bond funds were out of favour having given peak returns by dec 2008.
fundamentals will follow equity markets when trend changes.
though your Advice was good and logical,I wish you had changed when ever it was obvious to you and diversified.
since you have a long list of clients like most advisors it is not easy to chane tracks as quickly as markets need these days.
Comment by Sanjeev Mittal — June 25, 2009 @ 6:19 pm |
Dear Dr. Mittal, Thanks for replying back and its good to see that you read my blogs. I take all comments positively and the only thing i want to state here is that no matter what the technicality’s were i would have never recommended Equity Funds for a period of 6-12 months……NEVER. Its easier to comment today in the hindsight but If one is trying to make money by short term opportunities that might or might not exist then he should not call himself as an INVESTOR……..”PUNTER IS THE RIGHT WORD”
Regards Anil Budhraja http://www.steps2wealth.wordpress.com
Comment by steps2wealth — June 25, 2009 @ 6:45 pm |
dear anil,
i read your response today.
I am sorry I hurt your feelings so much.you may call me a punter if it pleases you.
Hope you continue to give safe returns to your clients.
regards
sanjeev
Comment by Sanjeev Mittal — July 5, 2009 @ 8:43 am
Dear Mr. Mittal,
Your comment fo fundamentals following the equity markets are absolutely relevent. There is a saying in the market that the equity markets always bottom out 6 to 7 months before the economy does and it is true in every part of the world. Even through the technicals such as 20 week average or a 200 day DMA or a 50 day DMA was suggesting the markets bottoming out, there was no clear signals from the charts that the markets were poised for a 60% rally in 3 months and especially for a client who is wanting to stay invested for 6-12 months. I know the biggest of the analysts in the country and no one would have stuck their neck out in the month of March to say confidently the markets will move up from the level of March,09 in 6-12 months leave aside the percentage upmove. Even then I respect your thoughts and wish you all the best for future.
Comment by Anirban Chakravorty — June 26, 2009 @ 4:38 am |
sir,
the analysts or any other person never predicts anything accurately.
it is about following a change in trend.
my point is once you see the trend changing,one must change his approach,instead of finding excuses and justifications,
did everyone not sell in feb march 2008 and were the fundamentals any better in march 2008 than july 2007
regards
Comment by Sanjeev Mittal — July 5, 2009 @ 8:47 am
Well looking at the scenario.. I would say you made a “safe” suggestion. You were not wrong in making that. I would first and foremost consider the risk appetite.. I am assuming that you clarified with the client what his personal preference concerning risks are. If he was ok with taking high risks then I would say your choice for him was not appropriate. If he mentioned that he is not a risk taker then your advice made sense.
I guess I would want my financial adviser to understand me first and then create a right balance between me and market conditions.
So don’t fret…keep on advising with noble intentions.. I am sure there are a lot more who have saved a lot due to your timely warnings and noble advise…
Comment by Praveen — June 25, 2009 @ 6:23 pm |
Thanks for your reply Praveen. As always you were quite clear. The only thing i disagree is that even if my client says that he is a risk taker for a short term its my duty to make him realize that he is not taking a sound decision. My job today is not to look at short term opportunities but to give consistent advice which in the long run would benefit my clients and help them achieve his/her desired financial objective. And the word “STANDARDIZATION” becomes so relevant here. I dont think so that environment in march 2009 was congenial for investing into equity with a time horizon of 6 – 12 months. There were so many of my other clients whom i made to buy Equity keeping in mind 3 year horizon.
Regards Anil Budhraja http://www.steps2wealth.wordpress.com
Comment by steps2wealth — June 25, 2009 @ 6:45 pm |
Your comment for fundamentals following the equity markets is absolutely relevant. There is a saying in the market that the equity markets always bottom out 6 to 7 months before the economy does and it is true in every part of the world. Even through the technical such as 20 week average or a 200 day DMA or a 50 day DMA was suggesting the markets bottoming out, there were no clear signals from the charts that the markets were poised for a 60% rally in 3 months and especially for a client who wants to stay invested for 6-12 months. I know the biggest of the analysts in the country and no one would have stuck their neck out in the month of March to say confidently the markets will move up from the level of March,09 in 6-12 months leave aside the percentage up move. Even then I respect your thoughts and wish you all the best for future.
Comment by Anirban Chakravorty — June 26, 2009 @ 4:41 am |
You were not wrong anywhere to the client to the best of your knowledge, experience and circumstances prevailing at that time. The situation could have been exactly opposite to your client as short term has lot of uncertainities attached to it in terms of sentiments, global markets, policies or even the demise of a leader or Managing Director of corporate. What I have experienced with you is balancing the portfolio within ones’s risk appetite and horizon. Also don’t think too much..
Comment by Sandeep Puri — June 26, 2009 @ 3:59 pm |
Anil totally agree with your advise.
I prefer making my 12 to 15 % over long term without loosing sleep rather than punting where i might rejoice one month and second month I am crying. Not to mention risks to my capital.
With sensex crashing earlier this year almost every one lost money in equity. There is no easy way to predict market bottom and as a prudent inverstor I expect my advisor to suggest me when to rein in my capital.
Your analysis was well timed however your investor just got lucky because Congress came to power with majority, had there been a split verdict market would have been further 14% down. In india basics work on long run for everything else that happens in market it is luck.
Either u can invest or play lucky. Long term prudent investor wins and this is not a saying just check any successful investors.
Comment by Rishi — June 26, 2009 @ 8:16 pm |
Sir,
My replies are never aimed at anybody in particular and when i was pointing “PUNTERS” it was all the people who use the market to make sporadic gains. In July 2007 the P/E of the market was hovering around 18-19 times and also the global scenario had started showing signs of cracking. Being a prudent investor i should have started lowering my equity exposure and when in March 2008 i would have automatically been saved. In march 2009 the P/E was 11-12 times and it made sense to still buy Equity but we should also not forget that global disorder was still looming large.
Every point in time we have two things to take care of; namely Technical and Macro/Micro economic factors. Looking at these i think people who were under invested should have started regular investing in march 2009 and people who were over invested should have reduced exposure to equities.
Comment by steps2wealth — July 5, 2009 @ 10:23 am |