Are you among the many investors who, having lost money in equity, have decided never to return to investing in shares?
If so, it is regrettably a clear sign of double standards. Wondering why is it 'unethical' to play safe with your capital?
Let me give you an analogy to explain my stand.
Suppose your child fails in an exam. What do you do in such a case? Do you make your child quit the school and sit at home? Do you ensure that he does not have to sit for any exam ever again? Do you protect him from the stress and pressures of studies and examinations?
No, you don't!
Instead, you arrange for extra tuition in the subjects where his understanding is weak. You make him work harder and study longer hours. You cut down his TV and Internet time. You motivate him. You coax him. You even reprimand him.
In short, you do everything to make sure that he becomes a better student and takes the next examination successfully.
But what have "you" done?
One bad investment and you quit investing in stocks for ever!!
Why don't "you" take extra lessons to learn investing in stocks? Why don't "you" work harder and study longer hours, to identify the right stocks to buy? Why don't "you" cut your entertainment time and instead monitor your portfolio?
In short, why don't you become a better investor and make the next investment profitably?
So next time, before you scold your child, think of the double standards you are applying.
There is no denying the fact that, equity is probably the only class of investment (apart from property), that can deliver 'wealth-creating' returns.
There is no denying the fact that, you probably failed to make money earlier, because you were not adequately prepared.
At the cost of being (boringly) repetitive, I repeat my favourite analogy:
If you are an untrained driver or do not follow the traffic rules, you are most likely to cause accidents.
If you are an untrained investor or do not follow the investment rules, you are most likely to lose money.
To prevent serious loss from traffic mishaps, you need protection such as seat belts and airbags, in addition to becoming a learned and disciplined driver.
To prevent serious loss from equity investment, you need protection such as stop-loss and diversification, in addition to becoming a learned and disciplined investor.
Sure, getting into IIT or IIM is not as easy as getting into an ordinary engineering or MBA college. But, will you be OK if your child takes the easy route to a sub-standard college?
Sure, choosing the right stocks is not as easy as making fixed deposits in banks. But, you yourself are taking the easy route to a sub-standard investment!
By the way, you are lot more fortunate than your child.
If your child has to gain admission to IIT or an IIM,
a) he has to "himself" pass the tough exam,
b) and "beat" lakhs of other candidates sitting for the exam.
If you have to successfully make money in shares,
a) you can leave it to the professional and competent mutual fund managers,
b) you have to just focus on your needs and don't have to necessarily make more returns than lakhs of other investors.
Therefore, instead of vowing not to invest in equity ever again, you must take the following pledge:
- I pledge to invest in equity through the mutual funds
- I pledge to study and identify the right mutual funds for my goals
- I pledge to invest small amount regularly instead of large lump sum amounts
- I pledge to be a long-term investor and not look for instant profits
- I pledge to stay invested through booms and busts
- I pledge to be persistent and patient.
If so, it is regrettably a clear sign of double standards. Wondering why is it 'unethical' to play safe with your capital?
Let me give you an analogy to explain my stand.
Suppose your child fails in an exam. What do you do in such a case? Do you make your child quit the school and sit at home? Do you ensure that he does not have to sit for any exam ever again? Do you protect him from the stress and pressures of studies and examinations?
No, you don't!
Instead, you arrange for extra tuition in the subjects where his understanding is weak. You make him work harder and study longer hours. You cut down his TV and Internet time. You motivate him. You coax him. You even reprimand him.
In short, you do everything to make sure that he becomes a better student and takes the next examination successfully.
But what have "you" done?
One bad investment and you quit investing in stocks for ever!!
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| Are you and stocks fair-weather friends or BFF (Best Friends Forever)? |
Why don't "you" take extra lessons to learn investing in stocks? Why don't "you" work harder and study longer hours, to identify the right stocks to buy? Why don't "you" cut your entertainment time and instead monitor your portfolio?
In short, why don't you become a better investor and make the next investment profitably?
So next time, before you scold your child, think of the double standards you are applying.
There is no denying the fact that, equity is probably the only class of investment (apart from property), that can deliver 'wealth-creating' returns.
There is no denying the fact that, you probably failed to make money earlier, because you were not adequately prepared.
At the cost of being (boringly) repetitive, I repeat my favourite analogy:
If you are an untrained driver or do not follow the traffic rules, you are most likely to cause accidents.
If you are an untrained investor or do not follow the investment rules, you are most likely to lose money.
To prevent serious loss from traffic mishaps, you need protection such as seat belts and airbags, in addition to becoming a learned and disciplined driver.
To prevent serious loss from equity investment, you need protection such as stop-loss and diversification, in addition to becoming a learned and disciplined investor.
Sure, getting into IIT or IIM is not as easy as getting into an ordinary engineering or MBA college. But, will you be OK if your child takes the easy route to a sub-standard college?
Sure, choosing the right stocks is not as easy as making fixed deposits in banks. But, you yourself are taking the easy route to a sub-standard investment!
By the way, you are lot more fortunate than your child.
If your child has to gain admission to IIT or an IIM,
a) he has to "himself" pass the tough exam,
b) and "beat" lakhs of other candidates sitting for the exam.
If you have to successfully make money in shares,
a) you can leave it to the professional and competent mutual fund managers,
b) you have to just focus on your needs and don't have to necessarily make more returns than lakhs of other investors.
Therefore, instead of vowing not to invest in equity ever again, you must take the following pledge:
- I pledge to invest in equity through the mutual funds
- I pledge to study and identify the right mutual funds for my goals
- I pledge to invest small amount regularly instead of large lump sum amounts
- I pledge to be a long-term investor and not look for instant profits
- I pledge to stay invested through booms and busts
- I pledge to be persistent and patient.
