Hansi Mehrotra – Don't Let Overconfidence Bias Lure You into Concentration Risk

Guest profile  

 

Hansi Mehrotra runs the financial literacy and investor education blog, The Money Hans. She was named in LinkedIn’s inaugural global 10 TopVoices for Money & Finance. More recently, she was included in the LinkedIn TopVoice and PowerProfile for India in 2018 and the year before, the same site’s PowerProfile for Finance in India. Her profile on that site has more than 289,000 followers. Hansi has over 20 years of financial services industry experience, mostly in online delivery of investment research and consulting for the wealth management industry across the Asia-Pacific region. She set up and led the same region’s wealth management business for Mercer’s investment consulting division in Australia and Singapore. And, Hansi has led a number of projects in India, including the design of investment options for the National Pension System. She holds a BA from the University of Delhi, a graduate diploma in applied finance and investments from the Securities Institute of Australia (now FINSIA), and is a Chartered Financial Analyst (CFA). 

 

“Just because we didn’t have data doesn’t mean it never happened.”

- Hansi Mehrotra

 

Prelude to tale of woe and Hansi’s motivations  

• She finished her degree at the University of Delhi 
• by correspondence because she come from a very small town.  
• Her desire to learn finance was due to a “lack of money”. Also, her father had lost a lot of money and she wanted to know why.  
• While earning her graduate diploma in Australia, she worked as a waitress part time.  
• Hansi’s drive and skill for self-study came partly from her father, who urged her to help her less academically inclined brother with his work  

 

Asset allocation and sizing of position – went to Zero 

• Hansi and her husband started a joint-venture company to research tax-effective agriculture schemes.  
• They became well-known for writing the best research reports on how to receive tax benefits from planting trees, such as in orchards, vineyards, and for pulp and paper.  
• She joined Mercer and convinced them to employ her husband as a consulting to research agribusiness as an asset class globally.  

• With the knowledge they gained after reading Rich Dad Poor Dad, by Robert Kiyosaki and became interested in passive investments and income streams. 
• Thinking about starting a family, they discussed Hansi leaving work and needing support while raising children and managing the home.   
• They invested their combined life savings into the top rated agribusiness schemes that they had recommended to their clients. 
• Investments included pulp mills in Tasmania (specifically Gunns), orchards, grapes, stone fruit, and a big outlay in a unit trust in red-wine vineyards in the Barossa Valley, South Australia (premium wine-growing country).  
• The vineyard investment doubled its value in 12 months and other agribusiness stocks were doing well and achieving high returns, “so we were riding high”. 

• Hansi and her partner were then re-investing profits back into these schemes they were earning a return of up to 15%.  
• “All of it got wiped out.”  
• All three investment areas were hit with either environment factors (hail storms) other bad weather, foreign exchange losses and environmental impact issues and regulatory problems, bring them all to zero.  
• Because have were unlisted company, they could not recoup their investment in any way.  
• That was the end of their plans to have children.  

• Impact of investing and failure  

 

“Learn from mistakes and just because we didn’t have data doesn’t mean it never happened.”

- Hansi Mehrotra

 

Andrew asks about emotional strain on marriage 

“Tell us about the emotion between you and your husband as you were going through this – how did you manage to keep the relationship strong, because a lot of times going through financial crisis can tear people apart?”   

 

Hansi’s response  

They were both trained analysts.  

They forgot that what they had preached to others about investing applied to themselves. 

Feels great regret for letting someone else convince her to forget all she had learned, especially about diversification and other safety factors in investing. 

Such situations put a lot of stress on a couple and her marriage was no exception because they never got the finances ready to have children. “Now it’s too late.”  

 

Lessons Hansi learned 

1. Diversification should never be forgotten