Fear: Your worst enemy….
When a 24 year old girl keeps all her money in savings account / bank fixed deposit, you know what drives her. Its fear.
When a 54 year old is worried about his total corpus available, but will not invest in equity markets, you know what drives him. Its fear.
When a 73 year old has a very small corpus, a very nice house, but will not do a reverse mortgage or change of house, you know what drives that couple. Its fear.
Fear of investing in share markets is a greater killer of investment portfolios than volatility. This is just like how over eating kills far more people than say a gun does. However a slow killer like tobacco is not as scary as cyanide. So tobacco is socially acceptable as a killer.
Exactly like tobacco we accept inflation as a portfolio killer. What scares us is volatility, what kills us is inflation. What scares us is hard work outs, what kills us is overeating. We need to know what is scary and what is a killer. The silent killers are sugar, maida, milk, polished rice, and inflation. We worry about equity market fluctuation.
We need to start looking at volatility as an opportunity to make money, not as a threat to our investment portfolio.
Yes, it requires guts – but once you have built a portfolio you realize the benefits of doing it. Just like exercise.
Once you see the benefits of running, cycling or swimming you keep wondering why the world is not doing it? It is not exercise which kills (fear) but lack of exercise.
kizuki
Nice post Subra.
Can you elaborate or share some links, how milk is a silent killer.
Thanks.
Nitin
Subra,
It is not only fear I think. Lets say what data you have to prove that in the long term (20/30 years, equity will give “me” more return? Please mind you I am not talking Averages. Averages don’t apply on individuals. Please run with the data set for last 100 years with US/Japan/China/India/Russia etc.
Hemanth
One of your best articles , Subra sir 🙂
This is the way but needs to be implemented 😛
Krish
I have seen lot of case studies in US news papers taking the real examples of how persons reaped in great benefits of equity investing for long term.
Such open real cases are not dicussed in Indian media. Worse, even the financial bloggers in India who advocates equity investment superior to all other products do not showcase their own example or others.
We are still talking theory and principles based on SENSEX/NIFTY returns. Public gets motivated if they see role models of simple and small investments made great difference over a period of time in individuals lives. Let’s not talk about Buffets and Jun’walas alone. Let’s get the examples of next door or commoner in India to attract more people on board for equity platform.
Personally I did not come across any successful equity investor of long time among my friends and relatives in India. Sorry to quote, I have seen the opposite.
subra
Nitin
not sure how much you understand data and how much you understand markets. What will 100 years data prove to you? and how will u use it? it will be interesting to learn.
Equities and compounding work for me, thanks.
Nitin
A simple test that if you start investing in any particular year and do it for next 20-30 years, what are your chances to beat the fixed income return or any other asset class. What if you were in India/US/Japan or any other country ?
Compounding works but equity? You need lot of luck to be at the right time and right place.
On average equity outperform other asset class..this sentence has no flaw similar to the below sentence:
“When Bill gates visits any bar, everyone becomes millionaire on average”.
But it has no meaning for any individual.
Nitin
Well not sure if you FB post was related to my comment. In case it is, then you didn’t understand the question I was putting up there.
When you say, equity has served you till now and hence it will in future too without any solid analysis…are you getting the flaw?
MRHDK
Nitin,
I have read several articles written by finance professors from US universities which suggest what you are referring to.
They take data for very long period like 50-100 years and try to suggest equity doesn’t give returns for all and fixed income may be better. Please note that these professors don’t make much money in markets themselves!!!
Please don’t forget India is a growing economy. Bulk of their hypotheses do not apply to current stage of India.
I agree with Subra. Please see the his message rather than countering each of argument.
Too much of analysis creates paralysis.
Nitin
MRHDK,
Thanks for your comment. I rest my case.
Rajiv Ahuja
Sir, I concur with your observations. Before we embark on exercise, we take certain precautions. There are do’s & don’ts.Similarly with investing into the share markets.I believe one must do one’s homework & research on the share one is going to purchase or sell.
subhash
Dear Subra,
Regarding food habits you have mentioned above, i have very few knowledge. For “POLISHED RICE” i have realized and changed to “BROWN RICE” last year, and observed many good changes in my digestion system and feel better now.
And in the same way i need your personal suggestion, what are the substitutes for SUGAR, MAIDA and MILK in daily life. I have no idea how to eliminate these products from my daily life. “How you do in your daily life?”
I know this is not related to this blog,but i have curiosity on this subject and really want to eliminate these products from my daily usage.please comment
Max Life Insurance
Average out the risks and infact take advantage of the market ups and downs by investing at constant intervals. Dar ke aage Jeet Hain. Like we said earlier Rupee Cost Average. Its an amazing and truely fruitful concept.
Rajiv Ahuja
@ Subhash-Have honey instead of sugar.Avoid maida or at least lessen the qantity. Have double toned milk instead of full cream milk.Avoid cheese.
Raghu
Dear sir,
I used to work in the US for some time – I have seen many elderly workers full savings in 401K wiped out in short time. I think, I have a reason to fear the stock market.