It was a happy Sunday morning. The weather was pleasantly warm, partially sunny with a cool breeze touching your skin now and then so you don’t toast yourself in the sun. Such mornings demand either a brisk jog, hiking or a nice game of football followed by pohe and doodh jalebi. But given Anubhav’s age and physique, he decided to skip the exertion part and jumped right on to pohe and doodh jalebi. But eating them alone is a sin, hence on the way to the store he called his two unusual friends Viraa and Ravindra. Unusual because they do not match his circle, he is old both of them aren’t. The only thing that binds them is their keen interest in investing.
(If you’ve read the previous post Anubhav is a man in his 60s, Viraa in her 20s and Ravindra in his 40s. What this article is trying to do here is throw some real-life scenarios so that investors can get insights. Psychology says nothing paints a greater picture than role-playing. I mean hypothetical loss is wayyyy better than real loss, right?)
Their discussion today is centred around rally in power, realty, chemicals, Titan, 7Eleven, low gold prices, Sensex touching 60k, gaming sector being the next trend, IRCTC stocks touching new highs etc and what did they do then (basically all the bull run elements).
Viraa being the most aggressive of the lot wants to give all these a try. She is all in for running after hot tips and stocks. Suffice to say, she is a surfer who confidently (occasionally too much) goes for the big tides, sometimes falling flat in the ocean. Being a naive investor, she has to learn to be patient, not put all eggs in one basket, not take rushed decisions, make mistakes, learn from them and increase her capacity to hold stocks.
Anubhav who just aims for a risk-free investment believes that this bull run is a bubble and will burst soon. He is the kind of person who wants to surf the big waves but feels content basking in the sun and the occasional cool breeze from the ocean. He can’t afford to lose while surfing. He is keeping his basket empty!
Ravindra is quite balanced out of those three. He wants to surf the waves but not recklessly. He also wants to relax in the sun and feel the cool breeze. He knows that he can afford to fall and try again. Given the bull run, Ravindra made his move but exercised caution too. He thinks, researches before investing and not rushes decisions. He also invests slowly and steadily in the market to avoid heart attacks. He with asset allocation and portfolio diversification spread his eggs across baskets. Ravindra believes that returns are always to be optimized not maximized. He goes for the best POSSIBLE option, not the best option of the lot, given the uncertainties of life. He is content with even 15% returns. Few Ravindras who don’t have so much time and insights hire investment advisors to do the above work.
Viraa does too much because she fears missing out, while Anubhav does nothing because he fears losing. Given the bull run, several process-driven, rational decisions could have resulted in immediate wealth or long-term wealth creation prospects.
So, the moral of the story here is to act like Ravindra, to take pauses and think.
I bet investors can identify themselves with one of the three characters. The question is, which one are you?