So should you invest directly in equities? Well here are some risks that I can see in the market today. Thought I should share it with you:

Risk No. 1: No fund manager is talking about interest rates going up. Ben Bernanke who thinks all problems can be solved by keeping interest low will have a problem. Once a few countries (did you notice a few small countries bought gold recently – smaller quantity than what India did, but is it a trend?). So Greenback could be in some tight spot in the longer run. As a country and as a world investor, we need to be prepared for the cumulative effect of credit deterioration around us – sovereign defaults will increase, big corporates will struggle, Euro competitiveness is a joke – see the Chinese power equipment pricing power. The recession may have just started – remember W is just 2 Vs stuck together? So we may be in a double dip recession in the world. And India may not create enough jobs for the 3-4 million MBAs, engineers, C As,  we churn out.

Risk No. 2: We ignore what we want t ignore: When Dubai happened, we said Dubai is not US. When Greece happened, we said Greece is not US. When Spain happened we said…When the Red Shirts disturbed Thailand, we said Thailand is not India. Dubai, Greece, Spain are symptoms of a world living beyond its means. One day it will catch up. We are all hoping when the music stops, the parcel will not be in our hand.

Risk No. 3: Throwing US currency from being the ‘reserve’ currency will be bloody. The US thinks the rest of the world owes it a living. It subsidises cotton – which leads to farmer suicide. Even Sharad Pawar will have to wake up to this. Dollar is strong because the Euro is worse :). Watch this space it will be bloody. Our blood.

Risk No. 4: We think India is insulated from all this. We are not. Our luck is which ever currency is strong, there will be enough Indians working there and remitting money from there. Thank God for Keralites, Sindhis, Punjabis, Gujaratis, and Tamilians – and their wandering spirit!

Risk No. 5: Thinking that only the above 4 risks matter.

Risk No. 6: Thinking all risks will be nicely tabulated and given to you in a website. I call this the MBA power-point solution – problem. Most of us want only 7 slides – problem, example, what will happen, what is supposed to have happened, what is the solution, scenario of this solution applied to past data,  and therefore will apply to the future, thank you and contact details.

Risk No. 7: The risk that will get your net-worth down is not listed here from 1 to 6. It is your behavior when the market is up or when the market is down. Investor behavior is much worse than Market behavior.

Amusing risk: I just received a ppt from a broking house – showing about 20 companies which were supposed to do well in the future. I had not heard about this research house, so I opened it out of curiosity. The sender Mr. J had called them ‘Multi-beggars’. Of course I do not wish to share the name of the analyst of the name of the company. This I think is the worst risk. There are 20 good analysts, but 2000 people masquerading as analysts…This is perhaps the biggest risk – if it is not the media :).

difficult to agree with a sarkari persons views – even if it is personal but read on

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  1. Personally, I have never read you writing like this. Nice!

    I don’t know if I am supposed to be worried with all this…but for now, I am just enjoying the article!

  2. I think subra is spending more time with shankar sharma, this is called ‘sangat ka asar’,the effect of keeping bad company.
    oneday subra comes out with list of multi-baggers like colgate, gillete, coromandal fert with optimism(or I say over optimist)of sensex at 48000 in 2020, nextday he comes out with 7 risk factors.
    Dear Subra either u have to sail boat SS (shankar sharma) or boat RJ(rakesh jhunjhunwal), do not adventure sailing both the boats with each of your leg in both, its risky.
    You are an investor and trader, your writings reflect what u called-Investor Behaviour on your part.

  3. Chief I do not know about SS, but Vallabh Bhansali and RJ are CAs. One with a brilliant academic record and one with a decent academic record. They go through balance sheets with a comb with the finest tooth! If you think they do not think of risk, you got to be worried. Warren buffet gets all his cash flow from his insurance business – that too re-insurance. Each of these persons can do 3 day symposium on risk. Wealth is created by reducing risk,not increasing beta. Since one day I plan to write a book on risk (LOL)…see all my posts on risk

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