Surely you have heard these few phrases…let me tell why they are dangerous:

1. High Risk Leads to High Returns:

When I talk about ANYBODYs portfolio in a class one student will say this “high risk, high returns”. In most of the portfolios that I have reviewed there has been RISK ELIMINATION, not risk embracing. Most of the people would have removed some money from the market when the market was booming. Or when they needed to buy a house, or an office. Or simply to put it into a debt instrument. So most of the wealth created has been by REDUCING RISK not by increasing risk.

Think about this: If high risk lead to high returns always, where is the risk?

Extending it a little further does it man Highest Risk is Highest Returns? What happened last time when you took high risk? did it lead to highest returns?

2. The easy money has been made:

Forget what Subra says..they were lucky to have been in the market in the 1990s and buy all those great bluechips at low prices. WRONG. WRONG. WRONG. Many of my shares which have made money would have made money for you even if you had bought it as late as 2008. Like Cholamandalam. Hdfc bank. Kotak bank. Even shares like Kajaria ceramics, Essel Propack. These were available at very low prices. Procter and Gamble was available for 1000 in Dec 2013.

It is about good shares. In fact I think the genius in me….is not the buying, but the ability to hold during such a fantastic joy ride – like Hdfc Ltd, Hdfc bank, Nestle, Colgate, Gsk, PnG…etc. Yes of course I can be accused of buying Tata steel and Tata power and holding on for too long a time. However I can live with that allegation. After all you do not get up one day and say “i have had enough of power companies let me go to Fmcg” – your portfolio creation is a dynamic processes. At this point in time I like Tata Steel, Tata Power and Bharti Airtel. All these companies have made me a lot of money in trading, so happy to hold an investment / trading position DESPITE knowing that none of them is an immediate multibagger. Some of these companies mentioned are STILL capable of delivering market defying results.

3. I have seen BULL MARKETS before, it ends badly:

People who have stayed a long time make this statement. I think it is like saying “do not live, one day you will die”. I have seen my grandparents, uncles, aunts, cousins, friends, ….die. All ended badly. This sounds so comic does it not? After all only when things get bad it ENDS. So you cannot sit and worry about death, you need to go and get a life.

Can you imagine a play? It ends. And somebody says “its over”. Then they switch off the lights and all go home. THIS NEVER HAPPENS IN THE MARKETS.

One day Fmcg will run out of steam and you may find some other market leader – Infra? auto? banks? I do not know but surely markets do not end. A few companies do. Sure. Some very well run companies had no clue about what will happen to them. Some industries closed won (the film camera). Some games go out of fashion. Some businesses lose out on profitability. In big cities even closed companies have a fantastic asset list for you to strip…

So do not get carried away. Sure if your goals are 3 years away you should be about 60% of the corpus in debt market..and every month you should sell off something in equity and rebalance….HEY THAT IS YOUR PROBLEM….not the markets problem

Yes one day you will end. Right now, keep investing.

 

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  1. I have read in your blog that you have been holding shares of HDFC, HDFC Bank,
    Colgate, Cummins India, P & G, Gillette for very long periods. I understand that this is the secret of wealth creation. Have you ever sold at least a portion of these shares in your portfolio or just held them through all the market cycles?
    I have stocks of HDFC, HDFC Bank, Asian Paints, Lupin,
    Sun Pharma, Cummins India, ITC & TCS in my portfolio which were bought six years ago and which I plan to hold for many years depending on the performance of the company. My broker is asking me to book profits partially – I am ignoring him. He says that the rise now will be followed by a fall in prices soon which will wipe out all my gains.
    What do I do? Do I just hold these stocks for long periods irrespective of market rises or crashes and just weight for the power of compounding to kick in after many years? Your anecdotes with your personal experiences have benefitted me a lot and have always given me the conviction to
    carry on.

  2. @Vinod

    Q:
    What do I do? Do I just hold these stocks for long periods irrespective of market rises or crashes and just weight for the power of compounding to kick in after many years?

    A:

    What killed Abhimanyu?

  3. @moronbuffett
    I have always had an exit plan – my holding period is forever. I was waiting for
    Subra’s answer where his past experience and anecdotes enriched my knowledge.

    As to your question, Abhimanyu was killed by a speeding train!

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