Raamdeo Agrawal of Motilal Oswal is a regular attendee at the Berkshire Hathaway annual meeting in Omaha, since he met Warren Buffett for the first time in 1994. Calling Warren Buffett his “guru,” Raamdeo Agrawal, the MD and Co-founder of Motilal Oswal Financial Services swears by the legendary icon’s investment philosophies. In a recent interview to ET Now, Raamdeo Agrawal revealed how Warren Buffett’s philosophy regarding diversification helped him to double his portfolio wealth in one year’s time. “I started buying stocks in 1980, so till about 1994, I used to think I am very smart guy and in my 10 crore portfolio, I had 200 stocks. More than 200 stocks, all sorts of junk were there, some good stocks were also there. Then I took one after I read Buffett first time. I cleaned up the portfolio and I had only 15 stocks that very year my portfolio doubled,” Raamdeo Agrawal told ET Now.
Interestingly, the Oracle of Omaha himself has a very concentrated portfolio, with just six stocks making up more than 70% of his overall investments. Renowned market risk expert Nassim Nicholas Taleb has recently published a blog post explaining how the billionaire investor made billions of dollars in the stock market by not only buying good stocks, but also refusing to buy bad stocks.
Nicholas Taleb, the celebrated author of ‘The Black Swan’, says that as opposed to popular belief, it was not ‘cost-benefit analysis’, but the ability to say ‘No’ to stocks which did not meet with Warren Buffett’s standards, which brought him billions in profits. He quotes Warren Buffett: “The difference between successful people and really successful people is that really successful people say no to almost everything.” Warren Buffett is often quoted as saying, “Diversification is protection against ignorance. It makes very little sense for those who know what they’re doing.”
In Morningstar conference held last month, Raamdeo Agrawal shared his insights on market timing, and its impact on wealth creation. “Timing the market kills the overall return of the portfolio,” says Raamdeo Agrawal. According to him, the investors should ‘buy right’ and ‘sit tight,’ for long-term wealth creation. “If you invest for the long-term, you’ll pass through phases of very high return, very low return, a phase of no return and also negative return. All this put together, creates long-term return. People want only high return phase.They don’t want other three. You will never have long-term return like that,” pointed out Raamdeo Agrawal.