Investment: Is The Age Really Concern..?

Investment: Is The Age Really Concern..?

By Mr. B. Padmanaban, CFP^CM

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, CFP^CM

Certified Financial Planner

www.fortuneplanners.com

9884349173

padmanaban@fortuneplanners.com

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