@karanmaroo & @nityanandparab
Your questions are in a way linked - joined at the hip, so to say. Thanks for asking a key question - that I have grappled with for almost whole of 2014, talked to a lot of market practitioners and seniors I respect (shared somewhere at VP in market-agnostic Portfolio construction I think) , and came up with a Portfolio Strategy which looked (to me) a good enough risk-adjusted strategy.
There is no Holy Grail. We keep searching for Refinements. I was a novice during the last bull market build-up, so take these comments with big pinch of salt
It has been drilled into me by my Mentors that Portfolio Returns cannot be seen in isolation. How much Risk have we taken to achieve the Returns - is what Fund Managers are measured by !!
- I have no doubt that VP Portfolio strategy as enunciated - was ideal risk-adjusted strategy for pursuing superior returns through Bear Markets leading to a Bull phase (which is what we have witnessed 2010-2015)
- I am equally sure this will be a sub-optimal strategy to follow through for the Bull Market leading to the Crash phase
- It’s an educated guess (don’t kill me for it) that different sections of the economy will lead markets at different phases of the ongoing bull market. At the moment Manufactured Exports is India’s only real pillar of growth. At some stage when credit cycle/interest rate eases, some other sections will take over
- We cannot predict the Timing - therefore I wanted a portfolio TODAY that is structured in a way to continue to do well - by being positioned (read balanced) in a way - that atleast 2/3rds of the portfolio continues to perform at the desired clip, while the 3rd helps stabilise with hopefully almost zero downsides (and not matching but decent upsides)
This obviously meant sacrificing some of the aggressive growth. Introduce more stability by accepting slower growth than we are used to but with much higher predictability/ sustainability/ longevity. Contra bets am still working on as mentioned.
So why choose PAGE and GRUH over other safe Compounders (which may be equally over-stretched) - like Karan asks?
- In my mind the two are still young horses - but match every characteristic you may want from stabilisers in Portfolio - very long runway, very very difficult to dislodge, very predictable. Management Competency we have come to trust that they will execute their best in adverse environments.
- Its a safe bet probably that these have enough stamina and youth to run faster than many others
- Most importantly in Team VP (surprise, surprise) we have enough Jockeys who have been riding these horses successfully, who can share their insights, and can guide you well when opportunities present themselves. Page offered many opportunities for decently long time in late 2013 and early 2014 where it was available within a fair range. Gruh gave enough opportunities around June this year to the discerning. If you are patient enough, every year you do get a few opportunities.
- But for that You must be prepared, you must know you are looking for that opportunity. be willing to take the Bite??? At worst what will happen, your bets in these will consolidate for a year, right. I will anyday take those ODDS.
[Dhwanil will identify well with these statements of mine ] No Risk, No Gain.