https://soundcloud.com/ithought-advisory/validating-advice
Podcast Transcript
Every portfolio often needs validation. Our ideas are constructed in a particular context and we find that soon thereafter the market context changes dramatically.
My own experience from previous bull runs is what comes to mind. When we come out of a bull market, we tend to think our portfolio is strong given that we built it in good times. But, on the contrary, portfolios built in the best of times almost always carry serious weaknesses. The reasons are simple.
When valuations are very high our choices are not adequate. We tend to rush into decisions which later look very ordinary. Bull markets also tend to raise the tendency to imitate. And most importantly, decision-making speeds tend to trip the quality of our investment process.
Then, when we land in bear markets, we begin to regret what we did. Often, we think we could have done things very differently. Choices suddenly grow wider. We start seeing better opportunities. And, we tend to have little or no money.
I recall that every bear market threw this challenge at me. But what is interesting is how I learnt to face that challenge. I would take a fresh look at my portfolio. And, I would seek peer validation. So, this let me draw up a fresh list of ideas. Induce fresh thinking and put together a new line up. This gave me the choice of changing my fortunes. I would get my thought process validated by a smarter peer before rushing into action. This helped to be sure that the remedial actions delivered.
If you are an investor in shares or mutual funds, this is a time when the market context is changing rapidly. Your portfolio constructed to an earlier context needs expert review and corrective action. Merely staying put with past decisions may not end well. You need to validate that you are doing the right thing.
A review with someone who can give an objective view can be greatly helpful. Choosing the right person to advise holds the key. My own learning is that this choice can make or break your investment performance.
A review needs to happen in competent hands. I strongly believe in that. I hope you reach out to your advisor and do the right thing quickly before it is too late.
If you don’t have a competent advisor, it is the time to find one.