Today, I want to share a few thoughts on how churn impacts overall portfolio returns (at least in my case).
This graph compares what happens if Rs 100 is invested in my portfolio from 2019 onwards (5y return cycle). In comparison, the portfolio has returned better than NIFTY 50 but has under-performed NIFTY 500 which is my benchmark index.
Below is my portfolio beta over the same time horizon as well (avg beta remains at 0.86 which I guess is decent)
Now I want to present the curious case of June 2022. In June 2022, I decided to sell a portion of my stock portfolio to move to cash. This was a mistake since I didn’t follow my investing principles and panic-sold. And then re-entered again around Nov 2022 in the same stocks which I still hold today.
BIG MISTAKE. Here’s how that decision impacted my overall returns:
tl;dr I lost 4.3% of my annualized returns due to this mistake (difference between low teens vs high teens)
To summarize my lessons:
- Don’t sell due to market volatility unless the fundamental yardsticks of business have deteriorated
- Probability of selling now to buy at lower prices later has a very low success rate
- Market volatility is a feature, not a bug
Any thoughts here?
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