When you talk to people who are say 22-30 years of age, you are normally prepared for all kinds of reactions, right?

Well one 27 year old girl had this brilliant conversation with me, and I am reproducing it more or less verbatim:

G: Subra Sir I need to invest Rs. 80,000 for my 80 C – tax provision where should I invest?

Me: ELSS – will give you a choice of 2-3 fund houses, take a pick, it does not matter.

G: Why not a bank fixed deposit, that also gives me the same tax benefit, or life insurance…..etc.

Me: In the long term…equity….etc. etc.

G: Sir why are you saying equities make money for EVERYBODY in the long run?

Me: Because it is true that in the long run (read 5 to 200 years as per your convenience and conviction and trust) one tends to make money. See Colgate, Gillette, Siemens, HUL, ITC, ….

G: You mean..ALWAYS, ALL SHARES?

Me: NO. Some good shares, but long term, most of the time.

G: How many shares have made money for share holders, and given a REAL return (nominal return minus inflation)?

Me: About 100 shares over the past 50 years out of 20,000 shares ever listed. (oops this girl was hurting!!)

G: How many PEOPLE have earned ENOUGH from equity markets to make a difference in their lives?

Me: About 100,000 out of about 2 crore investors (Sebi figure) or 1 crore investors (my estimate)

G: So about 5% of the companies and about 0.5% of the investors? Come on sir gimme a break. I cannot see how a mutual fund manager will pick ONLY those shares for such a small population, I am better off paying the tax.

Me: Hey kid you got me thinking…

G: I live in Malad and I have only heard of people losing money in Harshad scam, Ketan scam, trading….NOT HEARD ANY SINGLE Investment success story. I have ONLY heard of people making TONS OF MONEY IN real estate and gold.

Me: So?

G: I am planning to buy a house in Vasind for Rs. 19Lakhs. I have Rs. 5 lakhs of my money in a bank fd, will borrow Rs. 14 lakhs and pay an EMI of Rs. 14,000 for the next 20 years. I am sure I will get a tax break, appreciation,….What say sir?

Me: Some of my readers may react to you darling. God bless you.

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  1. as usual Subra sir will say ‘hey this works for ME’- seriously how does it matter to him where we invest? He runs a blog – neither is he selling equity to US or Real estate….lol

  2. Wrong question. The real question is how many of the investors who stayed invested for the long term lost money. The population of investors will shrink directly from 1 crore to a miniscule number. The returns these investors made would be comparable,if,not,better than investments in gold/real estate.

  3. She should be asked “How many people invested in gold and real estate and haven’t lost money?” and she goes with the attitude “Why should I spend money and energy to analyze good shares?” and “I need not think to invest in real estate as it is “what you see is what you get!””.

    And the whole Indian middle class should thank people like her!
    Without such good people, we can’t find a house for rent.

    As you said, God Bless her!

  4. I was able to empathise with her views.
    A lot of our views on money are based on what we have seen,observed etc around us . Our parents attitude/education have a big impact on us.
    We hear stories of people losing in stock market
    We hear people making money by investing in gold and real estate
    There are so many biases
    And it takes lot of courage to go against the tide, say I want to invest in stockmarket or mutual funds. As soon as the market tanks everyone makes it a point to say “I Told you so..”

  5. exactly Shinu. In our world we remember the most recent success stories. and why did people lose money during Harshad/ketan/ etc etc ?, it was because , we all wanted to board the gravy train after it had started.

  6. She should Just Continue to Read SUBRAMONEY and Postpone VASIND decision by 2 Years. Like us She will learn:

    1.How RENTING is Better Than OWING

    2. She will Learn how Not to be a victim of Innumaracy with examples such as..If my father would have purchased a House in Santacruz for say 2 lacs ..Today i would have been a CR PATI

    3.She will Learn Asset Allocation and About Good Fund Managers Like SIVA (Retiring soon and being replace by SUKUMAR) ,Sankar Naren,Prashant ,Keneth to name a few
    4.She will Learn how in most peoples case ,if we minus RE from their balance sheet at age of 50 or even 60 …We get Very Less REAL CASH Fortune.In their case Mistakes had happen…its her time to Learn from their mistakes

    5.She will also Learn some Formulas -How it makes sense to stay on Rent than owing if Rent*12*16 is much lesser than Actaul Unit Price .In Metroes this equation is completly in favour of Renters and Not owners

    6.She may Learn to be Asset Poor …Cash RICH is much much better than vice versa

    7.She will learn its better to be Invested in Steel ,Cement,Banks,NBFC,Colours (Read just as Example Tata Steel,Ultratech ,HDFC Bank,HDFC,Asian Paint)than in House in VASIND

  7. I think she has a very valid. Not every one is good at picking the winning stock. The answer to that is Index funds. Unfortunately, in India we don’t have a super low expense ratio fund link Vanguard. Hope that we get them in India soon to challenge the poor performing,high expense ratio funds……cheers…

  8. There is no gaurantee that any investment (equity/real estate/gold) will give real returns. All that matters is the right cost.

    How many fund managers would invest in penny stocks? How many investors have the patience to stay invested for long term without “churning” their portfolios? How many investors are capable of making rational decisions?

    14lakhs over 4 years is a projection. There are endless possibilities that something may go wrong (housing society scam/medical emergency/high interest rates) over the 20 years.

    Look for the best opportunity cost and take a well informed decision.
    Returns ?? Well… Leave it to the world economy !!

  9. Yes she is right being an aam aadmi(dont read aap).not a single business channel or news source never discuss abt long term investment & the thought process required to acheive it. Rather she watches property guru with rosy pictures of return. It all depends on education & thaught process.ironically the 0.5% theory is also true for all other assets class. She will eventually land in that 0.5% gainers of real estate investers also.

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