Some excerpts from my annual review to subscribers. Hope you will find it useful
Sources of outperformance
Superior performance versus the indices can usually be broken down into three buckets
- Informational edge – An investor can outperform the market by having access to superior information such ground level data, ongoing inputs from management etc.
- Analytical edge – This edge comes from having the same information, but analyzing it in a superior fashion via multiple mental models
- Behavioral edge – This edge comes from being rational and long term oriented.
I personally think our edge can come mainly from the behavioral and analytical factors. The Indian markets had some level of informational edge, but this edge is slowly reducing with wider availability of information and increasing levels of transparency.