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Sunday, March 06, 2016

Investment: Is The Age Really Concern..?

Investment: Is The Age Really Concern..?

By Mr. B. Padmanaban, CFPCM
Certified Financial Planner, Chennai

I would like to bring two data points though many know about this and very few only really checked this.

When I checked this, I found some interesting observation. Hope this helps.

Why there is a retirement at the age of 58 or / 60? It is believed that once you cross this particular age your mind and body will not work the same way what it has worked in your early part of your life.

Keeping somebody beyond that age will defame the individual for unnecessary comparison with the current generation.

We are basically influenced by the Recency bias, our mind will recall only the event which is new and fresh not the old one.

Let me relate this to Cricket. Everybody knows that Mr. Sachin Tendulkar is one of the greatest Cricketer the world ever seen. The fame was till 2011 to 2012, where he is the best in his business.

After that everyone talks about when he is going to retire, being a crazy cricket lover. I felt very bad about this.

Let's get into his Test batting average.

In the last 23 tests which comprises 39 innings between 21st July 2011 and till the last test he played on 14th November 2013 he has not scored a single century and he scored only 9 fifties and his average is 32.34%.
Tests
Innings
Not Outs
Runs
Average
50's
200
329
33
15921
53.78
68
23
39
1
1229
32.34
9
177
290
32
14692
56.95
59
15
24
1
633
27.52
4
185
305
32
15288
56
64
10
15
1
388
27.71
3
190
314
32
15533
55.08
65

It is very difficult to know the bottom where I have taken that last 23 tests he has not scored a century, but he should have taken after playing another 8 tests and he should have been avoided at least 15 tests.

In the last 15 tests his average comes down to 27.52%, 633 in 24 innings and scored only 4 fifties. Then the overall average will be 56%.

If he avoided the last 10 tests which everyone is talking about that time his average was still better 55.08%. In the last 10 tests, he scored 388 runs in 15 innings and 3 fifties average is only 27.71%.

Recently, I have attended IDFC Mutual Fund Wisdom Wednesday where I got a hand out how Mr. Warren Buffet’s performance over the last 51 years. He has created a huge wealth for all his stake holders, no question about that.

In that program it was told that during the year 1999, all the media were talking about Warren Buffet has lost his magic touch. Yet he is successful even today. When I go through the year on year data I found that in the last 16 years he has generated only 6.69% compared to 5.39% of the respective index which is S&P 500.

We all know that in a matured market active management finding it difficult to beat the passive management, still his achievement is commendable. Here, I do not want to comment on anything about his performance, yet I feel the age is the real concern for anybody.
 
100000

 WB Ret
100000
S&P Ret
1999
-19.90%
80100
21%
121000
2000
26.60%
101407
-9.10%
109989
2001
6.50%
107998
-11.90%
96900
2002
-3.80%
103894
-22.10%
75485
2003
15.80%
120309
28.70%
97150
2004
4.30%
125483
10.90%
107739
2005
0.80%
126487
4.90%
113018
2006
24.10%
156970
15.80%
130875
2007
28.70%
202020
5.50%
138073
2008
-31.80%
137778
-37%
86986
2009
2.70%
141498
26.50%
110037
2010
21.40%
171778
15.10%
126653
2011
-4.70%
163705
2.10%
129313
2012
16.80%
191207
16%
150003
2013
32.70%
253732
32.40%
198604
2014
27%
322239
13.70%
225812
2015
-12.50%
281959
1.40%
228974

CAGR
6.69%

5.39%

Age is very much applicable to all our mutual funds (MFs) too.

We are preparing a team to win 2019 World Cup Cricket, instead of looking at whether Mr.  Sachin or Mr. Dhoni is  great, being a selector (advisor) will Mr. Sachin /Mr. Dhoni able to score runs to win the world cup. I doubt! Better, we should select Mr.Virat,  Mr. Rahane &  Mr.Rohit Sharma. Age is very important irrespective of the field you are in...

B. Padmanaban, CFPCM
Certified Financial Planner
9884349173


Investment: Is The Age Really Concern..? Reviewed by S. Chitra on March 06, 2016 Rating: 5 Investment: Is The Age Really Concern..? By Mr. B. Padmanaban, CFP CM Certified Financial Planner, Chennai I would like to bring ...

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