‘The biggest risk in a portfolio is the portfolio creator’s inability to understand risk’
I have no clue whether Mark Twain, Warren Buffet, Peter Lynch, Taleb, or anybody else has made this statement…if they have not, here is a original statement from Subramoney. As originals are very rare, please remember you read it here first.
One risk that all of us HAVE to understand is the risk of inflation. So for all those experts who think a portfolio containing public provident fund, national savings certificates, bank deposits are ‘No Risk Portfolio’ please think again.
The youngsters whom I meet have got the following advise….
1. Over the next 3 years nothing good will happen in this country so keep your money in debt.
Vow…why should a 24 year old worry about ‘3 years from now’? Beats me. Ok let me stick out my neck. Over the next 3 years (starting Nov 2011) Hdfc Top 200 would have out performed the best FD that is available today (let us say SBI FD – not some risky debentures).
2. You will not incur a loss if you are in a debt portfolio. Correct.
You will NOT RETIRE either. My dad’s dividend income today is HALF the amount that he got as PF for his 37 years of service. If he had not invested his money in equities, he would not have the lifestyle that he enjoys today WITH HIS OWN MONEY staying in his own house.
A kid of 24 today runs the biggest risk of inflation and will not be able to RETIRE AT ALL (leave alone at 60) if he has a portfolio sans equity.
3. Invest in Real Estate – God does not make it any more.
Look at the 30 year figures, put it in excel and then take decisions. Maths and logic should prevail – not parental pressure – just heard of a 25 year old committing to buying a house because she was emotionally blackmailed by her mom to commit to a house.
Mom’s Logic: It is her house – at least it is forcing her to save by paying the EMI…
Like the depression babies of the US, India has the ‘Harshad Mehta’ and ‘Ketan parekh’ babies. These people keep talking of ‘My father lost his 3 lakhs in the market…or some such stories. Take a closer look – it is YOU who is to be blamed.Not the market, not Harshad Mehta, not Ketan Parekh, not SEBI…JUST YOUR LACK OF KNOWLEDGE..of course risk also comes for people who think websites and blogs can replace good advisers. For such people risk comes from reading too 🙂 – because understanding is not a given, is it?
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