Not by numbers alone

The computer, and everything it represents and can do, is the god of all investment analysts. Without access to vast amounts of data, our beloved Excel sheets or the complex models that these create, we cannot imagine doing any financial analysis. And yet, these tools are relatively new, having become commonplace only during the 80s in the West and from about the mid-90s in India.

I started my career at the dawn of computer-based analysis. Before that, people relied on a combination of manual calculations, intuition, and experience to make investment decisions. Analysts would pour over physical financial statements, using calculators and pen and paper to crunch numbers and identify trends. They would also rely heavily on their understanding of the market, the economy and the specific investments they were analysing. This process was time-consuming and often prone to human error. It required a keen eye for detail and a deep understanding of financial concepts. Analysts would spend hours, if not days, analysing a single investment before making or rejecting a recommendation.

For mutual funds, things were doubly difficult in India. Even the basic data was hard to come by. When I started analysing funds, data arrived by fax for the first seven to eight years and had to be re-entered by hand. Of course, the scale was smaller since the number of funds was small, and NAV declaration was not that frequent. Right in the beginning, it was much worse.

Here's a personal story that seems funny today. In the early 90s, funds calculated their NAVs once a quarter. So, most of the time, the investors did not have any actual data about what their investments were worth, and the mutual funds themselves didn't know. I got a taste of this in the early 90s when I landed at a public sector mutual fund's head office as a young mutual fund researcher (maybe India's only one) to find out their schemes' NAVs. I heard someone say "Wo NAV mangne wala aa gaya". It turned out that they hadn't calculated it themselves, so someone just handed me a 'Register of Investments' and asked me to calculate it myself, which I sat down and did!

This has been the case for decades, not just in India but all over the world. Despite the lack of advanced technology, some of the most successful investors in history, such as Benjamin Graham and Warren Buffett, built their fortunes using such traditional methods.

However, as technology advanced and the amount of financial data available exploded, the role of the computer in investment analysis became increasingly crucial. This was not entirely a good thing. The problem is inherent in the computer models and tools we rely on so heavily. They're only as good as the data we put into them. Moreover, what's important is not just what we include but also what we leave out. As it turns out, we ignore a whole set of things because they cannot be force-fitted into data.

Data is, by definition, from the past. The past few years have been a great demonstration of these limitations. Medical risks, environmental issues, social unrest, rapid technological change, political upheaval, wars and conflicts cannot be forced into data. It's a tough pill to swallow for the type of investor who grew up thinking that only the stuff you could measure and put into a spreadsheet was important. But now, many people realise this thinking is seriously flawed.

If I think of what most of these 'known unknowns' and 'unknown unknowns' have in common, I could put a single phrase to them - people. Human beings are unpredictable, and investors find it hard to factor them into their calculations. What is needed is a process that systematically considers the subjective unknowns and never ignores them, no matter how good the past numbers look.

This is hard for an individual to do but relatively easy for a team like the one we assembled at Value Research. Never ignoring subjective factors means having them as part of the process. Our team has a well-established and thoroughly tested process that breaks down broad investment targets into smaller, manageable steps. We employ a matrix of checks and balances to ensure that the basic requirements - quality, value and long-term perspective - are always met. Our approach combines both objective data and subjective judgement in perfect harmony.

You may only do some of this when you come to Value Research, but you can make your way. However, in a guided service like Value Research Premium, we ensure that this is done. When you are on your own, you could keep worrying about whether you have done it all. But, the sheer wealth of packaged information we give you about your investments makes it a very potent worry management system. Consider what you get from our service:

Portfolio Analysis: Most new members already have investments, some for long periods. For them, a big worry is determining if their current investments align with their objectives. Answering this question can be challenging due to the numerous factors involved, such as the goals and the tax implications of altering existing investments. With our Premium service, you can receive an assessment and recommended action plan crafted by our team of experts to ensure your investments are on the right track.

Portfolio Planner: These are custom portfolios suggested to you as part of your premium membership. The algorithm we have evolved considers your goals, income, saving capacity and several other factors.

Analysts' Choice: Often, investors want to choose their own funds for some particular investment purpose. Even with the help of our star rating system, it's a lot of work to zoom in on the right set of funds. However, that won't be a problem because you will have access to Analysts' Choice as a Premium member. Instead of the official categories of funds, we have created eight investor-oriented categories that match precisely with your financial goals. In each of these, my team of analysts and I have carefully selected a handful of funds to serve you with the best outcomes.

And a lot more
The features above are just the tip of the iceberg, so to speak. Our platform offers a comprehensive suite of tools designed to assist you in monitoring your investments, returns, diversification, taxes and all other essential aspects necessary to attain your financial objectives.

Take a look at vro.in/premium for the full details.