Thread by @shyamsek

"Are you beating the benchmark this year?"

Investors who usually want to beat the benchmark by miles are putting out this rather usual question.

#Benchmarktales

1/10

The first question to such investors.

Are you investing around the benchmark and hugging it?

Or are you investing far away from it?

Where you are investing counts. If you are into thematic or contrarian styles, then you are running your own race. 2/10

#Benchmarktales

If you are not looking at stocks moving the benchmark and investing far away from its prime movers, your returns will diverge rather than converge with benchmark returns. Contrarian investing typically works this way. #Benchmarktales

3/10

If one is always beating the benchmark, he has to be in trending trades all the time. His investing must be hugging market trends constantly. It is not as if that is risk free. In fact, it carries more risk when a trend breaks. 4/10 #Benchmarktales

The investment style is critical. Returns are a function of that style. Measuring returns without appreciating style adequately is like judging music solely through decibel count. Nuanced play won't please your ears. 5/10 #Benchmarktales

Benchmarks work very well when they receive most of the liquidity. When they work very well, they receive more liquidity. That's a virtuous cycle. But, it can work in reverse mode too. We need to remember that. #Benchmarktales
6/10

Professional investing always trends towards the ordinary when it stays benchmark obsessed. The reason is simple. Benchmarks see churn, shifting leadership and constant composition change. Aping it can be quite stressful for creative investors. #Benchmarktales 7/10

Artful investing will probably beat benchmark by miles over long periods of time. But, in the near term, it makes little sense to put it constantly on the weighing scales with the benchmarks. 8/10

#Benchmarktales

When benchmarks perform brilliantly, we usually don't find their winning stocks worth buying. No stock screams at us. Then, why scream about not beating such a composite?

Play your own game. Show ample conviction when you are playing away from benchmarks.
#Benchmarktales 9/10

In India, several benchmarks give room for unworthy stocks. Then, we quietly move them away. Endorsing a benchmark tantamounts to accepting those judgemental errors. The gaming of benchmarks is market's worst kept secret.
So why be constantly obsessed?
10/10
#Benchmarktales