There is something about how retail investors measure performance. First, they anchor performance to their own expectations. Secondly, they want their whole portfolio to do as well as the market’s best performing fund. Finally, they believe that their portfolio performance should be independent of the market’s. You will notice that all three reflect linearity of thought. In this calculus, risk and macros hardly find a place. Investors also tend to slight processes in their quest for performance. This usually leads to wrong expectations, behavioural asymmetry, and ordinary returns. Having the best advisor may still not help an investor if he does not show the right mindset and investment behaviour. Another common phenomenon is the calculation of fees and comparing its computing versus returns. As an equity investor, I never measured stock performance Vs management remuneration. What is important is how the business is run. Similarly, investors need to appreciate how their investment process is run. If one finds a mature, measured approach, it is best to leave the rest to the advisor. Often role play works to the detriment of portfolio performance. A typical example is “I will give you more money if you perform well for one year.” Most investors say this at a time when one should be aggressively investing. Little do people realise that when portfolio performance is exceptional, it maybe the time to recalibrate portfolios and not to pump them up in a hurry with more money. Markets rarely give time to investors to ponder over their own behaviour. When they do, like in the present, it will be every investor’s calling to utilise the window of opportunity. One year is too short a time in markets. You don’t need to be a wizard to know that.
You can be sure of an investment idea. But, you are never sure of the investment horizon.