Simple Investing

Good to hear that!
I am tempted to share few additional points from my notes.
Case1: Considering AUM size is small (say 10-50 lakh), If overall PF construct is aligned (more superior than inferior in terms of return over period) to the benchmark say Sensex, then the behavior, the fall, the risk, the dip may seem acute initially but is of no major concern in long run. Because the recovery in all probability will be better, superior and beating the benchmark. In a major fall like 20% of Index the PF may fall 2-4% more in the range of 22%-24%. But statistically the standard deviation of Index and PF will not differ much. Secondly if the PF has beaten the benchmark in previous consecutive period say 5 years then there will be loss of1-2 year gain effectively reducing it to gain of 3 years.
The Risk adjusted return of PF which can measured in terms of Sharpe Ratio will give better picture as how to handle losses in mental framework.

Case2: Considering AUM size is large (say 20-30 times of yearly expense), then in case of major fall of Index the draw down in terms of standard deviation will be roughly 7-8 times of yearly expense. Will be mostly in the range of 1.25 to 1.5 times of standard deviation. The Index behavior too synchronize in the same way which is basically a normal behavior statistically.

I hope didn’t added any confusion. May be I will explain with more graphs and chart next time during my next update.
Thank you.