There are two activities that I find have a therapeutic effect on me. One, is the act of ironing my clothes. It is a meditative activity, as I iron out wrinkles and straighten out the cloth. It is like I have ironed out the wrinkles from my life itself! The second is of clearing out the junk from my wardrobe and drawers. I admit, I don’t do this often enough, but when I do, I spend a good half of a Sunday on it. Ever since man discovered farming and became rooted to a place he began to accumulate. Till then, a nomadic life, the way of a wanderer prevented him from accumulating things that would slow him down and render him less agile. This change became our nature, in fact strengthening through the ages.
Do you know this tendency manifests in our investing too? When was the last that you opened your demat statement to identify irrelevant stocks? Small allotments through IPOs, buying on ‘tips’, buying on whims, all add to the fat! Then you would have also accumulated all kinds of mutual funds also – a tech fund here and an infra fund there, leftovers of an STP in a liquid fund, an SIP that you stopped after a year, so on and so forth. I have had clients come to me with pages and pages of stocks and funds which they never had given a thought to. Like a whole lot of orphaned children!
Remove the clutter. Mercilessly sell or redeem them. If you cannot decide, take the help of an advisor. If any investment is a very tiny proportion of your portfolio it will never add value, only add clutter. In my view, if any investment is less than 5% of your holdings, it is of no benefit to the portfolio. Do not make the excuse of diversification – for diversification without a plan is as good as no diversification. Positive diversification is when you are working with a plan, an asset allocation and an aim to optimise diversification. Know that excessive diversification brings down portfolio returns to average or below average, too.
Clean up, feel the difference!
T. Srikanth Bhagavat
Managing Director & Principal Advisor