I got out at 6pm -and it was bright. About 5 minutes into my walk and it turned very windy (my neighbor lost his car with a tree fall, luckily it was just parked and had nobody in it). And in 10 minutes it was pouring, real hard.

With more than half a century on the planet I could not predict this weather change..in 5 minutes. What gives me the supreme confidence of switching stocks or funds? Of saying “Hdfc Equity fund has not done well for a long time…so let me switch to Franklin India Bluechip or Icici Prudential Value discovery fund or even better Hdfc Sensex plus plan?

Actually nothing. Just a gut feel and sheer over confidence in one’s innate inability. Not supported by written documentation or analysed between gut feel, good research, or plain dumb luck! However we continue to jump from one fund/ share / industry / country to another with the SUPREME CONFIDENCE that our choices are right AND our switches will ensure better relative performance !

And we are extremely short term in ¬†our ability to retain events. So a Hdfc Equity’s non performance is visible (18 months) but the long term trend of success (10+ years) is erased. No, I am not recommending this fund, just giving an example. We forget how we felt in 2008-9 when we went through one of the worst financial crisis in the world. The American response (then copied by Japan, EU, Germany, etc) of keeping interest rates at zero is still iffy. Has this interest rate zero policy helped the world? has America exported inflation to the world? Will the developed countries react differently when there is a commodity led recession? See what is happening (or likely to worsen) in Australia, Canada, Brazil, Russia – the commodity kings. We just do not know. We are guessing. Accepting that is far more sensible than to say “I understand what is happening, so I am selling IT stocks and buying steel stocks”. I have no clue whether to sell TCS to buy Tata Steel. I liked Tata Steel at Rs. 200, but did not buy. No clue whether I was right or wrong. I guess time alone will tell.

Best is to bring HUMILITY into your investing. It helps. Accept and learn that we are all experimenting. Like Prashant Jain and Naren Sankaran are. They are far more alert in their responses than we are. Mistakes do happen, right?

Even when it comes to Goals many people are in a very unrealistic state. Their current standard of living thanks to their employment – does not allow for a Rs. 1 crore wedding, a Rs. 4 crores house, annual vacations in Europe and US and a nice comfortable retirement from age 58 to age 89. The money is just not sufficient. Tell them, and they are “but you have assumed 12% return in equities…my father has got 19% over the past 25 years…s”…again the aggression. The alpha male “I am better than the average index investor” or “to get 12% why should I be in equities..” Very tough situation.

Please bring humility into the investment process please. It is worth its weight…

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  1. You have been always canvassing on Equity investments. May be your father is pure lucky to have a good portfolio but statistics available for Nifty are : Return in QTD (-) 5.01%, last 1 year (-)0.2%, 5 years +5.68%, Since inception of Nifty (20 years) +10.97%. Now if you compare returns on FDs are not bad and you can have nice sleep.
    Believe, Equity market is for i)daily gamblers, ii)few lucky ones with long term investment (though more lucky people make moneys in lotteries than equity players) and iii)for those who get thrills by playing ‘share games’ (with cool other sources of income from ancestral properties). Most Marvari and Gujjus fall in the last category.

  2. Perfecto Sandip. You should only be in Fixed Deposits. In fact you should not even read this blog..just in case you make the mistake of investing in equities and losing money. Life is not about making money, is it? It is about sound investing and sleeping well. And to be in debt (preferably sbi fixed deposits which will always give 10% to senior citizens) you should not be wasting time reading blogs like this.

  3. Sandip, major wealth is created if you do your own business, all the investment is to maintain a lifestyle during retirement and achieve your goals ahead of time in case the returns are as expected!
    ~to each his own

  4. Sandip, just curious – why did you leave out the returns for 2 years, 3 years and 7 years? Or why not the returns from Sensex since inception. You can always cherry pick the data you want and prove your point. Equity is not for everyone and definitely not for someone who believes it is gambling.

  5. Sandip, try to learn about what is inflation and real rate of return. Then you probably can understand and appreciate what is equities or shares.

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