Sandeep Tandon's most precious investing lessons

Early on, we all used to look at data points in silos and I soon realised that decision-making based on this approach is as good as shooting in the dark. The big lesson learnt during these years was the importance of combining multiple data points into one particular thesis is only effective during certain phases. This learning laid the foundation for a multi-dimensional research approach and the genesis of VLRT (Valuation Analytics, Liquidity Analytics, Risk Appetite, Time) framework, of which we are reaping benefits till date.

My first learning was that the stock market is all about mind games. One should learn to take a contrarian call on the extreme levels of fear and greed. Though it is not easy to quantify these extremities, if one is able to develop this art, one can navigate this market quite well.

Investment mistakes
There have been multiple instances where we have made one big mistake of getting biased and opinionated either by a few opinion-makers or the so-called perceived revolutionary companies or emerging technologies or new-age technologies. Due to the inordinate noise surrounding these companies or technologies, I had been swayed by the story or narrative and took extraordinarily large exposure in these companies.

The biggest lesson learnt was that a large exposure should be backed by a detailed analysis and the focus should remain on data analytics rather than one becoming an opinion-maker oneself or believing that one is the best analyst for these new-age companies or technologies.

Mistakes such as the one mentioned above were the genesis of building a data-driven investment framework instead of a gut-feel or narrative-based one.

Also, the dot-com bubble of 2000 was the first bad phase for my personal portfolio. I predominantly owned technology stocks at that time and they lost 80-90 per cent of their value. Even though I could sense the euphoria in the market, I was attempting to improve my tax efficiency by waiting for my holdings to reach the long-term status so that I could optimise my post-tax returns. The big lesson learnt here was simple: in the stock market, don't base your decisions on tax planning!

An insightful story of my investment journey
My initial phase in the stock market is an insightful anecdote that I want to share. My journey in the stock market started in early 1992 when the Harshad mania was at its peak. My first lesson in behavioural finance was learnt during this phase as one could feel the frenzy and euphoria in the market. I distinctly remember selling a lot of the holdings from my family portfolio much before the fall. So, while a lot of people have bitter memories of this phase, I actually had a decent run on my investments and it was a good period for my family. Thus, I have fond memories of this phase.

This interview was conducted in June 2022

Also in the series:
Ajay Tyagi's most precious investing lessons
Pankaj Tibrewal's most precious investing lessons
Samir Rachh's most precious investing lessons
Chirag Setalvad's most precious investing lessons

This article was originally published on August 01, 2022.