Sankaran Naren, CIO of ICICI Prudential AMC, speaking at an Outlook event, emphasized that temperament is the most critical factor in successful equity investing. He argued that while knowledge is important, an investor’s ability to handle emotions and market cycles determines long-term success.
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Drawing insights from Warren Buffett and other global investors, Naren explained that high IQ does not guarantee superior returns. Instead, he highlighted the importance of making rational decisions during market fluctuations. He cited past market trends, noting that in 2007, caution was necessary, while in 2008, following the Lehman Brothers collapse, it was time to buy. Similarly, in 2020, after the COVID-19 market crash, those who invested wisely reaped benefits.
Naren pointed out that investor behavior often contradicts logic. “In 2020, when markets were down, investors hesitated to buy, while recently, when markets surged, caution was ignored,” he said. On the eve of Diwali, he publicly reminded investors that equities are not fixed assets, urging them to manage expectations.
The Power of Investment Journaling
Naren recommended a simple but effective equity strategy: maintaining an investment journal. He urged investors to write three to five lines before making any investment decision, stating their rationale. This record-keeping, whether in a notebook or digital document, helps investors analyze past decisions and refine their strategies over time.
He stressed that journaling should be done before an investment, not after. “Many investors take impulsive stock market decisions worth lakhs without research. If they maintained a journal, they could track which advice worked and which didn’t,” he said. While only a fraction of people follow this method, those who do have seen significant success.
Protecting vs. Growing Wealth
Naren concluded with a key lesson from his mentor, Haudenosaak: investors must decide whether to focus on making money or protecting it. Market conditions dictate this choice.
“As we meet today in February 2025, the goal should be to protect wealth. Over the past five years, both equities and real estate have given strong returns. Conversely, in 2020, when returns were low, the right approach was to invest aggressively,” he explained.
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