“Can you please suggest me some mutual funds which will give high returns over the time period of 5 years?”
“Please tell me mutual funds that can give me 30% to 35% returns on an average.”
Two queries that I received in the past few days.
What’s this?
Unrealistic expectations!
Greed!
—
“I don’t want to see even a single rupee negative on my investment.”
“…don’t want to invest in equity.”
“My portfolio has 37 schemes.”
What’s this?
Unrealistic expectations!
Fear!
Fear of missing out (FOMO)!
Greed and fear are two of the many faces of Ravana in your life.
Now that the Dusshera of 2016 is here, I call upon you to slay them.
But you see, if you have to get rid of something, you need something else to hold on to, at least till the time you can get rid of all of it.
What’s the thing you can hold on to instead of greed and fear?
It is the thing that destroys them both – Knowledge.
I recently attended a conference where Prof Sanjay Bakshi, one of the foremost authorities in India on Value Investing made a presentation.
He mentioned that to succeed in the long term, 3 key traits are required.
- A growth mindset
- Willingness to delay gratification (that is immediate benefit or pleasure)
- Capability to suffer short term pain
These 3 key traits are visible in all successful entrepreneurs. Not just entrepreneurs but investors too.
Let’s talk about delaying gratification. In simple terms, can you wait?
I don’t think I can explain it better than this video.
A child is offered 1 marshmallow (it’s like a sweet that children really love). However, the child is told that if she can wait for 15 minutes without eating, she can have 2 of them.
Let’s see what happens. Click here to see the video.
Can you delay your gratification? Can you not spend money now and instead invest it to receive a higher value of the same money in the future. Can you wait?
Replace the marshmallow with money (Rs. 1 lac today) and 15 minutes with 6 years (Rs. 2 lacs) and then let’s see what your answer would be.
Willingness to suffer short term pain is yet another critical element. If your investments are market linked then to see them go yo-yo in the short term requires some courage.
Just google Sensex Chart and then play with the time horizon – 1 year, 5 year, max. and you will understand.
You would be better off sticking it out over the yo-yo.
What will be the other name for this wait?
Going back to the conference I attended, Prof Bakshi also gave an example of Jeff Bezos and the company he is building, Amazon.
I am sure you have heard and read enough about him. I am equally sure you have shopped at Amazon too. I want to point out something very important that Bezos says.
Bezos said that while investing or building a business, most people tend to have short term horizons – 1 year, 3 years, may be 5 years. Now if you were to simply double that horizon to say 10 years, you would be in totally a different league. The quality of your decisions and the things that you decide to do would undergo a complete change.
In other words, Patience – one of the most important traits of an investor, an advantage
You must have heard stories of all those who made money and apart from luck, the other factor they would give weightage to is their patience, to the wait. Investors would recognise this as “time in the market” factor.
Yes, today, use the arrow of knowledge, to kill the Ravanas – Greed and Fear. Then let Patience emerge.
Pick the bow now and aim the arrow. Today. Everyday.
Happy Dussehra!
Between you and me: What are the small things you are going to do to delay your gratification? Are you buying that next fancy phone? Just saying. What else?