What you hear most often, from Fund Managers, is: "We look for great companies that deliver multi-bagger returns".
Sounds Very glam.
But just a slight problem: It is not borne out by data. Most fund managers are lucky even to perform as well as the market - let alone better.
So why has the "Human only" Investing Model stopped working?
1. Access to Confidential information is difficult. And illegal
The information arbitrage is largely gone. Most information is now publicly and freely available. Professional fund managers can no longer rely on this "privileged, private, often illegal, information access club" to make money.
That "edge" is now gone.
Thank God for that.
2. Vast availability of data itself is a problem!
Now there is an ocean of data that exists, whether for countries, sectors or companies.
So what are you supposed to do with this?
The traditional approach is to employ dozens and hundreds of human beings, aka "Analysts", to analyse and process all this vast flood of daily data.
Trouble is: it is simply not possible for human beings to cope with this deluge.
The human mind is not capable of processing so much information in so little time, so as to be able to make fast decisions in lightning quick markets.
As a result of this inability to process this mountain of daily data, human beings then start taking shortcuts: they start forming lazy, under-analysed, over- simplified opinions.
It does not help that human beings are hardwired to prefer stories & narratives over data, statistics, probabilities etc.
It does not take a genius to figure out that such opinions almost always will be wrong.
And with that, will go down your money.
3. Finally, the most important: human biases can derail the best investment intentions
As is conclusive through plenty of research, human beings are simply unfit to succeed at Investing: they suffer from inability to process vast amounts of data, and then understand them without individual idiosyncrasies, preferences, blind spots.
In other words, Analysis Without Biases is something Humans simply aren't built for.
Human beings are driven intrinsically by emotions, and less by facts or data.
To give a recent example, most asset managers had disproportionate exposure to banking and financials, even when it was very clear in February 2020-end, that the economy would be entering a period of high stress and therefore, leveraged companies would suffer the most.
And even when these companies started to fall sharply, most fund managers could not bring themselves to exit these companies simply because they had become extremely emotionally attached to their holdings.
Endowment Effect, where you see greater value in your holdings simply because you hold them; Loss Aversion which makes it very difficult to book losses, Bandwagon Effect where you want to be where everyone else is; are all classic biases.
Because of these biases, we see a very high degree of " Storification" risk: A massive risk in which every single position/ holding has been given a certain "story" and a certain poetic future road map which is almost always extremely rosy, without much or any risks.
Owners and Management of these "storied" companies are built up to be Gods. All the discordant elements (industry cycle, favorable policy, just plain luck) are brushed aside.
The bigger the "Story", the stronger the conviction.
And as fund managers talk publicly about their conviction, they become committed to that story and security.
When the story stops playing out, the fund manager is unable to see the danger and change.
This is because they are so convinced, that it's impossible to "un-convince" themselves.
"Storification" of positions is dangerous: when you have gone out and marketed these positions and defended/ extolled the virtues of these positions publicly, it is almost impossible to change when the facts and data change.
So instead of merely money, fund managers end up investing their emotions in their positions.
Human beings are generally not very good at changing their minds when they are emotionally attached to anything.
Human beings are terrible at accepting mistakes.
Machines have no such problems.
But Machines have different problems.
The Machine-only Model doesn't work either
There is a school of investing that believes that quantitative models are the antidote to the human-driven traditional fund management approach.
They are wrong.
Machines are only as good as the quality of human beings testing out a million or billion different combinations of factors, in order to arrive at a range of investing strategies that work.
Therefore, engineers or financial professionals, without extensive experience of investing, simply cannot produce a workable machine-driven model.
Almost every single factor needs to be the understood, debated, discussed, modified , based on deep knowledge, investment experience and Investment thought.
Plus, quants complicate their models, adding too many parameters to get the results they seek - a problem called over-fitting.
If used incorrectly, the models can end up finding meaningless correlations and regard them as Gospel truth - an error that gets compounded when the model is a complete black box without possibility of understanding what are the drivers behind a recommendation, or why something has stopped working.
Also, an only machine-driven model can never be sensitive enough to sudden changes in the environment or in company fortunes. Think a disruptive Covid crisis or a geopolitical development on a macro basis or policy changes which impact a particular industry or company.
Which is why First Global's (Hu)man+ Machine Model is vastly superior to standalone Human or Machine Models
Our fund management team has decades of experience in navigating all kinds of market situations across the world and in India.
When this team sits and builds and tests a machine learning model, on an ongoing basis, the quality of inputs, analysis and factors that go into building a quantitative Machine Learning model are of a completely different level, as compared to merely "quants" building these.
Added to this, tactical strategies are rarely done well by machines, when there sudden changes in fundamentals.
What you need is this edge of best-in-class Human+Machine Model, that combines the best of the machines and the human beings.
The present and the future of Investing belongs to the combinatorial approach of Human+Machine Model.
But all Human+Machine Models are not equal.
So always ask:
Who are the Humans running the Machine?
From the desk of
Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years
If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!
Or WhatsApp us on +91 8850169753
Economists Think Dollar's Fall May Explain the Recent ‘Rally’ by Steve Liesman
Einstein taught us about relativity in nature. Now come Devina Mehra and Shankar Sharma of First Global to teach us about relativity in financial markets -- and raise some serious questions about just what is driving stock prices.
First Global reports are quite credible and, on occasion, more than that.
What prompts this mention is Intel's earnings report and the fact that First Global has had a pretty good bead on the company and its stock.
AMD up again following First Global upgrade to ‘buy’ (AMD) By Tomi Kilgore
Analyst Kuldeep Koul at First Global upgraded Advanced Micro Devices (AMD) to "buy" from "outperform," given the "exceptional traction" that the chipmaker's Opteron line of processors has been able to get.
Baidu Climbs on First Global’s ‘Outperform’ Outlook
Baidu Inc., the operator of China’s most-used Internet search engine, rose to the highest price in two weeks after First Global rated the shares “outperform? in new coverage.
Personality counts: Walmart's frugal, but Target charms
"It's better to take a slight hit on [profit] margins and keep on moving and inventing," says First Global Securities. And at least for now, Target is inventing in a way that appeals to consumers with money to spend.
At 11 times trailing earnings, Energizer is cheaper; Gillette's multiple is 25. But cheaper doesn't mean better, says First Global.
Bipinchandra Dugam @bipinchandra90
invested in both GFF-GTS and Super I50. Thank you very much for such wonderful investing experience with completely new approach. In my 15years of investing first product I felt which close to what customer want.
Shishir Kapadia @shishirkapadia1
by far you are the best, I have not come across transparency, acumen, global expertise, exposure, protection of capital, delivering return from any fund/ fund managers. Invested very small size in 3 products will keep on increasing it over the period
Piyush Bhargava @PiyushB88762654
Thanks you team FG specially Devina, my investment doubled in less than 3 years in SDPB As a investors & PMS distributor of your product looking to have a long-term relationship with the company. @KarmathNaveen the person with whom I always interact
Sumeet Goel @GoelSumeet
Very happy & relaxed to be invested with first global pms
Congratulations on super performance, above all transparency and systematic process are unmatchable. One must opt this, if person consider him/her self as an investor. Very happy to be part of this since invested. FG has managed worst year (ie 2022) so efficiently and skillfully.
With so much of volatility in the market, risk management is very important part & considering that FG is doing awesome work!!! Kudos to you Chief
Amit Shukla @amitTalksHere
Truly outstanding. As a retail subscriber to #fghum #smallcase, I can vouch for the Nifty beating returns (8% vs 3%) in last 1 year. Keep up the awesome work @firstglobalsec
We can load above testimonials on site as a scroller, and just below that we can add a section for compliments . Below tweets are comments and praises are related to our content, performance and some our direct compliments to you.
ADIT PATEL @ADITPAT11226924
Good team... Special mention @KarmathNaveen .. he is soo helpful anytime of the day or night..
Bought Peace with FG-Hum.Moving all funds from DIY investing to well managed and diversified PF at low cost.
It has doubled almost, excellent pick.Every small investor must invest in her FG-HUM Smallcase.
Suresh Nair @Suresh_Nair_23
I have 8 small cases and your has been the most rewarding ones .. thank you Devina.
Sayed Masood @SayedM375
There is absolutely no doubt that she is one of the best investors of India in modern times but more importantly, she shares the most sincere and sane advice with retail investors.
Wow Superb Returns🔥 Congratulations Chief for being Number 1 among all PMS!!!
You are one of the sharpest mind in Global Stock Market
Congratulations Devina, results talk in itself!
Congratulations ma’am @devinamehra ! The consistency you have in maintaining the top rank position is outstanding! 👏
Mihir Shah @Mihir41Shah
We are learning More about markets (& Life ) thanks to U than we learnt in our Professional courses.A BIg Thank You, Wish all get Teachers Like You!!
Sumit Sharma @MediaSumit
"The ability to be comfortable with being outside consensus is a superpower in investing...and in life." Devina ji hits the nail on its head!
Majid Ahamed @MajidAhamed1
Congratulations @devinamehra mam! All the best for long term returns as well.
Vinay Kumar @VinayKu05949123
This is the wonderful session I have ever attended till date. One of the most fruitful hour of my life. Devina madam, ur clarity on financial mkts is simply superb.The way u portray the facts supported by "data" about stock mkts is really astonishing.I will listen again.Thanks.
I loved to read your journey, insight and philosophy. It's a pleasure to read and know of your takes on market and life.
Check & follow @devinamehra's timeline for lots of post debunking such rosy stories. Also, she gives amazing 🤩 sector directions/hints.
KLN Murthy @KLNMurthy2016
Good actionable insights, great article!
Suresh Nair @gkumarsuresh
Devina Madam is simply terrific... good knowledge, straight and simple thinking.
Very difficult to emulate such traits. I listen her past interviews from youtube.
One of the brightest minds in the world of finance :)
Radhakrishnan Chonat @RCxNair
📣 Calling all investors! Just had an incredible interview with @devinamehra, Chairperson and MD of First Global. We discussed the importance of global diversification, effective asset allocation, and the risks of sitting on the sidelines. Trust me, you don't want to miss this!
Excellent performance. Flexibility is the key as you have mentioned it earlier also. Cannot have finite rules for infinite mkt opportunities.
To be honest, the insights which Devina madam brings in is very enriching..have learnt a lot from them...
Himanssh Kukreja @Himansh02428907
One of the most accurate analysts :) I always look forward to you interviews mam
Abhijeet Deshpande @AbhijeetD2018
Madam, It is always a treat to read your insight, not only on business but on other topics also!!
Thanks for this wisdom ma'am. Always love hearing your thoughts on everything equity. :-)
Excellent points! Can clearly feel this thread is a product of marination of many books and years of experience. 👍
Kamal thakur @Kamalgt10
Superb !! Your knowledge, analysis & articulation is simply great 👍
Follower on Twitter and Subsciber on YouTube of First Global, really helping me in my investment desicion. Thanks
Copyright 2019, All Rights Reserved. Developed By : Hvantage Technologies Inc. Maintain By : Aarav Infotech