When a person invests his earnings be it in any asset class, either Real Estate, Fixed Deposits, Gold, Mutual Funds or Stocks, the one single minded approach here would be to beat the benchmark or how is my investment doing against its peers?
Whatever be the condition, all of us want to be the best, the same holds good with investments too. We should be making the best returns when compared to others. If we find that our investments are giving double the returns against other assets, there is full of joy. If we find that we are marginally above the benchmark, say the SENSEX is 10% and we are 11%, still we are happy, because we are outperforming.
Suppose we find that we are negative to the benchmark, say the SENSEX is 10% and we are 9%. There is worry and it is good too, because, this is the condition where thinking process comes to play. Should I hold on or shift my investments? In most of the situations where there is below average growth in investments, people have missed to observe and take action of this condition, where, the investment is under-performing and they have not taken action.
To help our clients know how their investments are performing against the SENSEX or NIFTY, we have begun an initiative to report the performance of our portfolio against that of NIFTY every fortnight, with details about what is right and wrong. It will be of help to our investors to know if the money is safe and give confidence about the future.
From the time that we have been tracking the performance of our portfolio since December 2012, our portfolio has managed to have 61% profits against the NIFTY returns of 33%. We had an advantage as our portfolio consisted of strong growth stocks. As we come to the shorter periods, in the last 1 year, our portfolio was positive with a near 1% profit where the SENSEX had lost 5.63%.
Whereas on the last 6 months and 3 months period, we are trailing the benchmark, the reason behind the underperformance is that, most of the stocks in our portfolio were exited following the market weakness in December and January 2016. After the sell out that our markets had, which was overdone following the Global slowdown, our exposure in the markets were down to less than 15%. Cash was moved to debt funds to protect the account from any further weakness.
On a normal process, stocks move in and out based on their fundamental strength, now that our portfolio has exited almost all its holdings, it will take a couple of quarters to load stocks to it, from the sectors that show renewed strength.
Till the September results are out, markets are likely to be range bound while adding a couple of stronger stocks, that show strength on their earnings.