Let me start by saying this again “Short Term Thinking Hurts” and hurts bad.

Let us take some examples:

There is a wedding where food is served. Of course there are sweets, and very attractive food – well laid out, smelling good, looking good…and of course there is a huge salad table also.

There is short term pleasure in choosing sweets, right?

So let us say I choose a sweet. It is actually a LONG TERM pain, even though it is a pleasure for the next 30 seconds. It stays on MY waist for the next 30 years.

So if you think long term pleasure = a series of short term pleasures, it is WRONG.

Now if a 23 year old wants to invest what happens? He/she has some feeling that markets are risky (thank you media you have done a great job). Then he consults his parents…who scare him more. So the kid goes to the ‘friendly’ uncle who sells him a LIC policy. Is this short term or long term? Clearly long term, no issues here. Is it a saving product or an investing product? Clearly a saving product. Why because the markets are risky in the SHORT TERM.

So a short term scare has made this kid go to a less volatile and a very inefficient product.

In the short term equity markets look risky because of the volatility. However if you are investing for the long term you need to look at equity. The media with its shrill voices is not too great at improving the investment climate. They actually ENCOURAGE short term thinking and love trading.

So one way to avoid short term thinking is to stay away from the TICKER channels. Honestly. One of the top wealth creators said this on television itself a few years ago almost shocking the host, Udyan.

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  1. LIC is definitely long term, dont think otherwise – long term PAIN for the policy holder; long term BENEFIT for the agent/”uncle”.

  2. We had written a longer piece on this topic:

    statspotting.com

    The most important part is this –

    All of us have a tendency to over-react to recent events. It is obvious in many of our actions, starting with what we talk about all the way to where we spend or invest. But the reaction could be in two ways – we see the trend, and either think that the trend will break, or that the trend will continue.

  3. Subra sir,
    This is exactly what happened to me! 21 yr old boy entangled on LIC rather than MF SIPs. :'( Wish there was subramoney.com that time.

  4. Agree with you.

    But my grouse is different. Look at the unfairness of it all. Why are short term pleasures and long term pleasures mutually exclusive?

    As somebody has said – Enjoy everything while you can, because medical science is hard at work to prove that everything you enjoy is bad for your health.

  5. Subra,
    Can please you throw light on why Japanese index couldn’t recover from 35K value(in 1990) even after 22 years. I am sure 22 years is real long term. Is there a possibility that you see, this could happen in Indian equity also?

  6. Suggested some colleagues & colleagues not to go for LIC for 80C., and they looked at me like a FOOL and just ignored me. Then I decided to NEVER GIVE FREE (or UNASKED) ADVICE 🙂

  7. I certainly would lke to know the name of the wealth creators who said so. As I have never heard such a thing on any of these so-called business channels.

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