Annual Reflections— 2024

This is the second year of the ‘Annual Reflection’.
Previous Year 2023

1. Quick Context

I have been investing in markets for the past 5 years. I decided to summarise my learnings briefly in a letter. There is no intended goal except to create a moment of reflection.

From this year onwards, I’ve decided to expand the scope beyond the financial journey and include career and other aspects of life.

2. On returns

• 2024 was very rewarding. The portfolio went up by 70% bringing 5-yr CAGR to 26.1%.
• If I had invested in NIFTY50 instead of purchasing individual stocks, my 5-yr CAGR would have been 19.5%.
• It results in an outperformance of ~75% over 5 years i.e. INR 100 invested in NIFTY-50 would have become 244 vs 319 in my portfolio.

Return Comparison Portfolio & NIFTY 50 — 4-yr CAGR (2023) & 5-yr CAGR (2024)

3. What changed?

• I got lucky and I am not confident if this is replicable. Why? — Read on.
• In the 2023 letter, I mentioned 2 mistakes (a) not respecting valuation (b) position sizing. So I corrected these two mistakes.
• I concentrated my portfolio on two stocks (a) Amar Raja, bought at P/E of 13, went up by 100% (b) Kaveri Seed, bought at P/E of 11, went up by 70%.
• ~3/5 portfolio was invested in these two stocks. Yielding significant returns at portfolio level.
• As of today, I do not hold any of those two stocks. I had invested money thinking these would be 3x in 5 years or 7x-10x in 8–10 years. They went up significantly in just one year. But that’s not the reason for selling though. I’ll come to that.
• I had also subscribed to SOIC’s research desk services. Some of their recommendations also worked out well like Prestige Properties, Tejas Networks, GPIL, Senco, and Polycab. SOIC desk covers ~30 stocks. I had invested in 8 of them. Having said that it’s not a recommendation to buy their services. Please do your research.

4. Mistakes

• Checking the portfolio too often
  Frequent portfolio checks led to impulsive and “unwarranted” actions. There hasn’t been much improvement here, especially since the portfolio was going up.
• Inadequate research
  I relied too much on others’ research, using “investor quality” as a proxy for business quality. While this is a good starting point, I believe one should develop an approach to bottom-up research. I wasn’t doing my best — for example, reading quarterly calls, analyzing competitors, etc.
• Not doing that & still investing can best be termed a ‘hobby’ irrespective of the portfolio size or returns.

5. Learnings

• I realized I’m at best a hobbyist who got lucky with good returns.

6. On pursuit of investing

• Charlie Munger says ‘merely being shrewder than other people at identifying stocks and passively holding them to make money for only yourself is not enough of a contribution to society for what one is taking’.
• This dilemma has continued for a few years now. More details in #5 in 2023.
• By now, the portfolio has grown in size, and leaving it to luck with my hobbyist skills did not seem the best decision.
• So I have given our family money to two professional firms
  (a) 2point2 Capital
  (b) Persistence Capital
  Again no recommendation. Please do your research.
• Does this mean I’ve stopped investing?
  No, I still invest, but the amount is small, so the risks align with my tolerance. This decision has freed up significant time, which I now invest elsewhere.

7. On careers

Hit upon the realization that to feel fulfilled at work, one needs to see ‘work’ as an opportunity to “serve” or “delight” others.

• Choose whom you want to serve.
• To serve well or delight, one need to obsess over the details.
• One can only sustain this obsession over long-term if one pursues something one genuinely enjoys.

Hence a fulfilling career boils down to this:
“Find what you love and keep doing it with the intent to serve others.”

• Financial outcomes are simply the result of relentlessly serving others in your chosen field.
• My school had this quote written at the entrance:
  “शिक्षार्थ आइए, सेवार्थ जाइए” (Come to learn, go out to serve).
  I understand its meaning more deeply as I progress in life and career, climbing Maslow’s hierarchy of needs.

More thoughts on the topic:

Let your curiosity guide you through the complex web of life — 5 min video
Seeking purpose in professional pursuits in contemporary times
Story of Aravind Eye Hospital — Infinite Vision

8. On ‘life’

• My wife and I had a dream of building life near mountains. So when work allowed, we shifted to Dehradun and now enjoy this view from our home.

That’s all! Wishing a very happy new year 2025