Risk that kills…and risk that scares…
Let us take a typical Punjabi wedding in north India….there are many people who carry guns and fire in the air. Why the do it does not matter, but they do it.
Or let us take the case of a kid who is asking his mother permission to go to a friend’s house – and the house has a swimming pool. The mother says no. They have a pool – and I do not want 2 unsupervised kids going to the pool…well that danger is real. However not sending a kid to the other house because there is a gun in that house is mathematically not correct.
Similarly in the Punjabi wedding the risk that guns will be fired is SCARY…but the killer is the rich food..it reduces say 10 days in the life of 4000 guests!
Exactly similarly in the portfolio of any person the risk that scares is the volatility (during Harshad scam my brother lost 4 lakhs, during Ketan’s scam….blah blah blah) but really the risk that kills is INFLATION..which is a sure NEGATIVE compounding for a long period of time.
If you know what compounding can do to your wealth over long periods of time…just put a -ve number and see how it can harm your portfolio.
Most Indians especially in the government service and public sector units…keep their money in bank deposits and post office deposits. Over the past 10-15 years the number of participants in the equity markets has declined substantially. All these people have lost a chance to put their money to work…and that is sad.
They do not realise that the risk that kills is different from the risk that scares…LOL
Dheeraj
Subra, most ppl dont invest in shares seeing the fluctuation in the price, which is quite true as well. DLF is a bluchip company which touched around 1400/- during 2008 rally, now tell me how many more years it will take to reach at that price. Many so called technical expert suggested to buy DLF even at that price. There are so many other bluechips which will take many-2 yrs to reach those peak or may never reach those prices.
Most of general public buy property, gold, FD, PF etc. which sounds very good to me. By doing this, they are atleast sure about the principal amount.
Thoughts…
subra
Dheeraj no clue how long you have been in the market, but by what definition on earth is DLF a bluechip? I am tickled. Be that as it may, the market does not owe anybody a living, nor does it promise wealth. If it were so simple all investors would be rich. LOL. It is a very cruel market where only 1or 2% of the entrants make money. Others lose and go away. God bless them. We need them. If free technical advise is so nice..why is it free I have no clue. If everybody understood risk so easily, why would I still be able to do 1 day workshops on investment risk? Thoughts…
Muthu
It is unfortunate to that only a tiny minority in this country got the benefit of the bull run in the last one decade.
With a decent growth expected in the economy for next 2 decades, how many would be able to capitalize on them, by participating in equity markets?
The trend so far is not encouraging.
Even if we remove the hindsight bias, a mediocre equity scheme would have a given a much better return than a debt product.
I’m interested to know (just only broader outline) as to what you cover in one day workshop on investment risk.
Manickkam
Hi Subra,
you are right in most sense. Some people are ready to put their money directly in stocks and want their money to double and don’t want to come out of it unless they make profits and ready to lose all their money.
Also, they don’t really analyse or see the risk and invest just based on the company name/tips given by their friends (Are they really friends?)
Interesting to see that most of them in this side don’t really go into the mutual fund side, saying it don’t give much returns and ready to lose all their money directly in stocks. After losing their money for the first time in stocks, giving away free advise to everyone saying “Stocks are like Playing gambling and do keep away from stocks.” How funny world!!
Regards,
Manickkam.
Gurdial
Dheeraj,
Direct equity investment is not for everyone. For an avg retail investor MF provide the best option and if one does a SIP thats even better.
Dheeraj
Yes, I completely agree Gurdial.
falgun
Freakonomics is indeed a good book which is carrying all such examples.
bumb ka gola
Subra Uncle,
Do you have anything against Punjabi’s. I think you classify any one north of Gujarat as a Punjabi just as we classify anyone south of Maharashtra as a Madrasi 🙂
Guns are not on display in Punjabi weddings. They are a phenomenon limited to parts of Haryana and most of (Western) UP.
Punjabi weddings have by and large moved on to the display of wealth.
Do not accuse our food as well. I attended a Marwari wedding in Chennai that shaved at least 20 days off my life.
10 days in the life of 4000 guests! – 4000.. sure? What have you been smoking?
Have you been watching the reruns of Azhagiri’s son’s wedding or is it Jaya’s foster son’s wedding video? 🙂
The risk of getting details wrong certainly doesn’t kill. Not on a blog at least. 🙂
anon
on this I must keep quiet… afterall I own tiny slices of IVRCL. And Granules India.
yep, good grief.
*tiptoe hastily*