Who am I… and Where do I need to go?

‘Who am I’ is cheesy punch line to start writing something.. but that’s fine. This note is lookback about my 12 years of journey in financials market.

B-School Brainwashing and my first job: In B School days working for big investment banks was the big thing – as CAs aim to work for Big 4 firms we are trained to think that if we don’t work for International Investment banks we have not made it. My peers were preparing for this long before I could what is an investment bank and how is it different from normal bank. My friends were either appearing for CFA Level xx and here I was struggling with do basic accounts in MBA class (given my engineering background). But, coming back to the point – the idea that “Fundamental research is everything and my life will go to waste if I don’t become a Fundamental research analyst” was drilled into my head. After many turbulent events at the campus placement (story for some other time) – I got a lucky break with one the (too) big (to fail) Investment bank as a backoffice research associate. Although the job had little to learn about fundamental analysis it was more charts / excel update – I am sure many of us will relate to it. But there is glamour and carrot – glamour of working for US Investment bank and carrot that I can make it to the big leagues (these dumb ideas are fed by Bollywood movies, showing underdogs win at the end). Back offices should finance more such Bollywood movies from their HR budget to keep their employee morale high – who knows it can tame down the employee turnover. I was getting tired of chasing the carrot and the same time I got a lucky break - “Sell-Side” associate covering Indian markets (yes its funny in hindsight for folks who have don’t this but not for 29 years old).

Switch # 1: I switched over to sell-side after three years at back-office – this is the place where for the first time I did fundamental analysis and I started helping Financials and Real Estate Banks’ analyst. Being an Engineer who didn’t like accounts and was always unsure of making a cash flow statement – doing banks’ was blessing in disguise. To top it off, my boss (analyst) was one of the kindest person and we are still very good friends.

Covering Banks was new for my boss as well, as he had spent time doing real estate before I joined in 2013. Don’t scratch your head, Yes there were dedicated real estate analysts during the 2006-12 real estate boom-bust cycle When we started covering Financials, we learnt a lot about Macroeconomics alongwith Fundamental Research. We did scuttlebutt research by traveling across cities (and we were the first ones to do it that time and now it’s a commoditized research product).  In nutshell, I got exposure to Macro research, fundamental research and scuttlebutt research during this stint. Its been 7 years I left the job and I still miss it sometimes. Career growth dilemma hits again – the research setup at sell side are so lean that moving to an analyst role is very difficult – skill is necessary but not sufficient. And there was another opportunity “back-office” but on buy side was knocking on the door. (Lure of the job – “I would work closely with Portfolio Managers – DemiGods of our profession”).

Switch # 2: Moving jobs, moving to new city working on buy side – where Sell-side will be at your service: I have never treated a sell-side analyst badly and I never will – because I know first hand that their job is tough and these folks really go miles in servicing their clients. Buy side job was awesome – blank canvas, lot of time and resources – you just need a plan and intent and people will help you achieve your goals. I will explain it in a bit – if I am learning on my own I will spend hours learning about companies, sectors, making contacts and getting all the data for my whimsical hypothesis about how either a stock works or “How to make money in a specific sector?”.

Fantastic learning ground and I wanted to make the best use of it, as I knew exactly what all I have missed in the first five years. I started learning about sectors (Sector Research) and then speaking to my knowledgeable sell side colleagues learnt about stocks across sectors. Few analyst taught me about Quantitative research and how factor investing works and how to identify sector moves. Despite all learning, there was a vacuum, something was missing and I started to interact with Trader friends and figured something missing in my armor was Technical Analysis (Yes from Fundamental analysis to Technical Analysis). I am always on lookout to get any (ethically achieved) edge. I met a very kind mentor serendipitously and that was my start of Technical analysis journey.

Solving the puzzle further: Learning technical analysis was fun, painstaking and rewarding as well. For a while I thought I have got the holy grail of investing. This was the time I started idolizing traders (all the Market Wizards) and thought Grandfather Buffett was past phenomenon. Yes, there are age to behave naively – especially when I had not seen a full market cycle. Coming back to the topic of Technical Analysis, I saw value in it and kept building the knowledge over last 5 years. Pitfalls of doing lot of Technical analysis from time to time were seen in the form of laziness to analyze business – and then I came across quotes like “Bhaav bhagwan che” (Price is God) – which doesn’t do lot of good as markets wants us to be active all the time and that is exactly what is injurious to financial health. Like Bollywood movies – people come to senses after intermission – and I started hitting the ground again with Fundamental analysis blending Technical analysis into my process (from both position sizing and risk management perspective) – I never chose one over the other and I also pledged to myself that my aim is not to demean momentum, priceanalysis or macro research or fundamental research or quant research rather to collect the edge what all styles have to offer.

In last 12 years, I have done CFA, FRM, Technical analysis programs, learnt to code in Python, networked with phenomenal people across industry (Locally and Globally) and I can see how different everyone is and yet everyone has a certain edge.

This post is about acknowledging that all types of research can give us some edge and lastly the behavioral angle of investing is super important. There is no shortcut to maturity either in life or in markets. All styles of research work in cycles and in different time horizon – the least asked question in investment discussion is about – what is the time horizon of your view? I hope we ask more questions to figure out – Who am I and were do we need to go??