Cut to a year ago or so. Someone comes to an advisor for help in managing their money better. They discuss their aspirations and their expectations and agree that they would have to be together for at least a three-year period to see some good results. The investment manager or research house were confident of creating some good returns to the client through their advice or stock picks. Client agrees, pays the fee and the association begins. Both parties decide that the approach needs to be leaning towards conservative (meaning no big risk to be taken) and returns around 20-25% should be considered as decent and desirable. Very happy.

Cut to the present. A year has gone by and it is time to take stock. Market has been in good form and returns are in the range of 25-40% in various indices. Market is making daily headlines.  The client is looking at the portfolio and seeing a return of 25%. She pulls a big face. That’s it? In such a good market, this is all you could do? Hell, my own picks have done much better than this! I don’t wish to continue this arrangement.

What went wrong? Unreasonable expectation is what went wrong. Incorrect focus is what went wrong. Greed is what went wrong. This is the situation with many people who are into advisory work.

A year ago, 25% return seemed like a dream. But today it seems like a pittance. A year ago, discussion was about a CAGR of 25%. This meant that the relationship had to go thru a 3–5-year togetherness. But a bull market throws all these out of the window. Returns are suddenly absolute. Cagr is forgotten.

Like they say, in a bull market, everyone is a genius stock picker. So, any effort made at analysis and proper risk management- based selections are quickly overlooked or even criticized as being too conservative. The client forgets the fact that it was her exhortation to be ‘careful’ with the advice that was a restriction in the first place!

But you know what is really wrong? It is actually ATTITUDE.  A year ago, people were seeking solutions. At that point of time, the attitude was one of surrender, knowing that he or she is unable to do it and hence some advice from a professional is required. But a year later, it is the attitude that has changed. Now, the same person has flipped to sense of entitlement- if the market did 25% then I needed to get 35%- type of entitlement. And, if you didn’t produce that, then attitude flips to judgmental- you are no good, my neighbor is better, I can do much better myself etc. etc.

We are all seeking solutions all the time, for everything. For e.g., if we want to build our body, then the desire of a six pack is not the focus- the attitude towards hitting the gym and exercising every day is needed. If we want a good life ahead then perseverance of the right path today is the attitude that is needed. We get our solutions or our desires fulfilled when we approach a matter with the right attitude.

As a trader, desire for profits is paramount. As an analyst, desire to be right on the call is paramount. But an attitude towards being disciplined with entries and exits and money management is what will produce consistency of profits for a trader. An attitude of being curious about what can impact a company among the various elements that surround it and being diligent in seeking them out and stringing them together will produce consistency in analytical efforts.

The client who agrees to get a solution for a 20% Cagr needs to develop an attitude of patience. Of perseverance. Not go flying off along with a market that performs now and tanks later. Without that attitude being in place, it is difficult to achieve success. It is even more difficult to be serviced by those who can deliver that success to you. So, think before you engage with others on anything where you need a solution. Do you have the right attitude towards that engagement? Have you discussed it all with your advisor? Have you given your advisor the right kind of perspective about what you will expect? Finally, are you certain that you are not going to go off at a tangent just because something else happened?

In the market, everyone is rendering some service. Brokers are facilitating transactions, mutual funds are trying to produce some returns even as they are trying to increase their AUM, investment managers are trying to render higher returns to attract business and research analysts are vending a service to ensure longevity of the revenue by sustaining client relationships. On their side, all of them are quite clear as to what they are getting into. But what about the client? Is he clear how he is going to be with each of these service providers? For e.g., is the broker responsible for trading losses incurred by the client due to his own follies. The one with the right attitude will understand that 99% of the brokers are the same- they just enable you to transact and nothing more. But clients keep switching brokers, blaming them for losses incurred.

Similarly, if clients keep shifting the goal post every time the market zigs this way or that, then how can a MF or Investment manager deliver consistently? The right attitude of allowing the professional to deliver in the time frame agreed upon is what is needed. Alas, people are more concerned with the urgency of the solutions they seek and too quick to pronounce judgements on performances.

If you really want a good solution to guided market profits, make sure you have the right attitude towards engaging that service. If you want to be trained, have an attitude of being coachable. If you are using a product, then develop an attitude of being able to follow instructions that the product carries. If you wish your money to managed, have an attitude of patience and repose a sense of confidence in the manager over the pre agreed time period.

Without the right attitude, you are just wasting everyone’s time. And maybe, your money.


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