Avoid 'flavour of the day' ideas: Chirag Setalvad

Chirag Setalvad
Age: 37
Qualification
BBA (University of North Carolina)
Current position
Senior fund manager, HDFC Mutual Fund

My annual target for the fund

To beat the relevant benchmark by 6-7%.

The Chirag Setalvad way of investing

I believe in a bottom-up approach based on fundamental analysis with an emphasis on business quality, understandability and margin of safety.

My outlook for 2011

Markets are reasonably valued and returns are likely to track earnings growth with greater stock-specific moves.

Five things my stock-picks must have

Sound management, attractive valuations, strong return on capital and good cash flows. I don’t touch stocks That do not have straight-forward management.

My risk appetite is

Moderate. Risk lies in not understanding what you are doing. The important thing is to take calculated risks after considering alternative probabilities and outcomes. Capital protection is of paramount importance.

What I do differently

I try to avoid 'flavour of the day’ ideas.

My own money is invested in

Mutual funds—diversified equity 50-60% and fixed income 40%.

One bias I try to control

Confirmation bias—tendency to be more receptive to information that confirms your hypothesis.

What I like about my job

Constant learning through reading, interacting with smart, accomplished people; company management, colleagues etc.

Small investors should

Focus on investing via SIPs.

How frequently do you churn your portfolio?

My average portfolio churn is about 15%.

My best decision

Has been to always work with smart, like-minded people.

My worst decision

Not selling fast enough when an investment thesis goes wrong.

Which books have influenced your investing process?

One Up On Wall Street by Peter Lynch, Why Smart People Make Big Money Mistakes by Gary Belksky and Thomas Gilovich and The Making Of An American Capitalist by Roger Lowenstein.