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.
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