Brainstorming the Current Market Volatility…

By: Manish Chandak

Indian Association of Investment Professionals (IAIP) Pune hosted a thought-provoking session on “Brainstorming the Current Market Volatility” by Ashish Kila on 3^rd July 2016. Ashish Kila, CIO of Perfect Research, is a rank holder CA and MBA from MDI Gurgaon. He is known as a soft-spoken person yet a hardcore equity investor. He likes to hang around and network with people who are passionate about equity investing.

Ashish began the session by discussing about current market volatility in India and how it will not impact equity investor if they stay invested in India in the long run. He also shared his ever evolving investment philosophy and how he is closely following investment gurus like Warren Buffett, Charlie Munger, Howard Marks, Mohnish Pabrai and Prof. Sanjay Bakshi.

He compared and contrasted equity investing to owning a business. On one hand, equity investing gives you all the benefits of owning a business but you don’t need to grapple with the managing day-to-day activities which normally a business owner has to deal with. He quoted Tim Ferris and said that time is the scarcest resource and we can save that by investing in good quality stocks at decent price and let money compound over a period of time without personally running/managing the business. As per him, money that you don’t require for 5-10 years and that you don’t need for fixed expenses should go in stock market i.e. Truly Long Term money. If one doesn’t have time and financial wherewithal, then he should go for index investing as over the long run 95% of fund managers are not able to beat the index.

Few of the things which learnt over a period of time through following various investment gurus, reading and investing in equity are:

1. Predictability of earnings is more important than growth in earnings.
2. Quality of earnings is more important than quantum of earnings.
3. Take your losses quickly and profits slowly for your objective is not just to be right but to make big money when you’re right.
4. There are two kinds of people who lose money: those who know nothing and those who know everything.
5. With a wonderful business, you can figure out what will happen; you can’t figure out when it will happen. You don’t want to focus on when, you want to focus on what. If you’re right about what, you don’t have to worry about when.

He also shared his investing process: The 4C’s of Investing

1. Cloning – Following Role Models:

Study the stocks that smart investors are buying and buy the ones you understand. One should choose his role model as per his temperament. So if you are value investor, you can follow investment gurus who firmly believe in value investing and their investment philosophy. However, you might not know exact asset allocation done by these investment gurus. You can use Google alerts to get more information on deals done by their investment gurus.

2. Checklist: How to avoid errors and learn from mistakes.

Checklist is nothing but a collection of points needed to check before making investment. Checklist approach will help you to remain objective and avoid behavioural biases. However, it might give you a false sense of security. So you need to devise your checklist judiciously and improve it over a period of time based on your experience.

3. Capital Allocation: Concentration versus Diversification.

Few investment gurus are proponents of having a concentrated portfolio whereas others firmly believe in diversifying their portfolio. One needs to do his capital allocation based on his investment philosophy rather than being swayed by short term market performance.

4. Checkout: Exit Strategy.

Checkout is nothing but when to sell a particular stock. Ashish discussed views of various Investment gurus on when to sell stocks. He also shared his experiences on how he exited various stocks.

This was followed by Q&A session where Ashish patiently answered all queries related to currently market volatility and its impact on equity investors, his investment philosophy and his views on various sectors and industries across the globe.

• MC
• Photos by Prashant Shah and Ashish Kulkarni