3 hrs ago
Saurabh Mukherjea Says Frequent Trading Can Hurt Returns
Saurabh Mukherjea says investors can hurt their results by trading too often.
He gave an example where holding investments longer could have increased returns from about 14% to 15.5%.
His Coffee Can strategy means choosing strong companies and leaving them alone for many years.
He says people sometimes make bad decisions because their judgment can be wrong.
A stock may fall in price even when the company’s business remains healthy.
HDFC Bank was one example he discussed.
Mukherjea said investors should study earnings, deposits, liabilities and asset quality instead of reacting to rumors.
He believes that holding a few excellent stocks for a long time can outweigh losses in other stocks.
Saurabh Mukherjea said frequent buying and selling can reduce investment returns rather than improve them.
He said a portfolio earning about 14% could have returned roughly 15.5% if held longer.
Mukherjea’s Coffee Can strategy focuses on buying strong companies and holding them for a decade.
He advised judging stocks by fundamentals rather than short-term prices, media coverage or market chatter.
Using HDFC Bank as an example, he said a strong underlying franchise can persist despite prolonged price declines.
- Who
- Saurabh Mukherjea, author, founder and Chief Investment Officer of Marcellus Investment Managers, discussed portfolio activity and long-term investing.
- What
- He argued that frequent buying and selling may hurt returns and recommended focusing on company fundamentals and longer holding periods.
- Where
- The interview was published through Mint Extraclass; no physical location was specified.
- When
- The comments were made in a recent interview with Mint Extraclass; no exact date was provided.
- Why
- Mukherjea said trading decisions rely on fallible human judgment and can cause investors to sell promising stocks or ignore underlying business fundamentals.
Frequent Trading
Long-Term Holding
How to seek better returns
Frequent Trading
Buying and selling can be used to capture market opportunities and exercise investment judgment.
Long-Term Holding
Mukherjea said trading added no value in his cited example and that staying invested could have produced higher returns.
Responding to falling prices
Frequent Trading
Investors may sell a stock after a prolonged decline or in response to concerns about its leadership and prospects.
Long-Term Holding
Investors should examine business fundamentals and avoid reacting solely to short-term price movements or market sentiment.
Managing portfolio risk
Frequent Trading
Selling can appear to limit exposure to a stock facing uncertainty or a possible negative event.
Long-Term Holding
Holding a diversified portfolio allows exceptional gains from a few stocks to outweigh losses in others, according to Mukherjea.
Key facts
- Speaker
- Saurabh Mukherjea
- Illustrative return
- A portfolio earning about 14% could have earned approximately 15.5% if held longer.
- Investment approach
- Coffee Can investing: selecting companies with sustained revenue growth and high returns on capital, then holding them for a decade.
- Portfolio example
- Mukherjea said investors may need only two or three successful stocks in a portfolio of about 15 stocks.
- HDFC Bank price move
- The stock had fallen about 30% since November of the previous year, according to the article.
- Fundamental indicators cited
- Earnings, liabilities, deposit growth, asset quality and staff quality.
- Main warning
- Market chatter, media coverage and boardroom concerns can lead investors to make flawed decisions.
Quotes
Saurabh Mukherjea
Author, founder and Chief Investment Officer of Marcellus Investment Managers
“I felt I should do some buying and selling to demonstrate my skills and exercise my judgment. There was plenty of data to analyze from company conference calls and broker notes to annual reports and AI feeds. But, as I showed, the buying and selling added zero value”
livemint.com
“As soon as you mess around with the portfolio, as soon as you try to exercise judgment, the risk you run is that stock B, which could have made you 10x in 10 years, you fiddle around with that”
livemint.com
Sources
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