Let us consider 2 investors A and B (I thought a long time before choosing A and B was wondering whether to use real names, then thought it does not matter!). They both have the same income, went to the same school, married similar girls, have similar risk tolerance levels…well they are almost twins.

A and B had the same grades in school and were thought to be similar in all their activities. If they did anything they would be head to head – well almost.

Now if we do put them through a pain tolerance test what happens. Let us say A and B were made to sit on a car radiator which was heated slowly. The game is – the person who jumps off first is the LOSER. It is just one way of seeing who can stand more pain as compared to the other.

So we start the game and both of them sit on a bonnet of a nice big Ambassador car. Both are sensitive to pain. Both twist and turn (allowed) but both keep sitting. However suddenly B jumps off, and loses the game.He concedes the game to A and accepts defeat.

Clearly A and B are pain sensitive, but A is MORE pain tolerant than B.

Now if both of them had been doing a SIP – and the market tanked like it did on 22nd Sep (Thursday – we will soon call it Black Thursday unless soon we get a 800 point fall, then this Thursday will be forgotten) – what will happen?

There is a good chance that B will call his adviser and ask him – ‘Markets are tanking..people are panicking..what should I do?’. Now, all advisers are themselves not sure what to do! So the adviser will say ‘I think the market is likely to reach 4300 or even lesser, so I think you should sell your shares / stop your MF/ etc.’

So there is a good chance that B will sell off his shares, mutual funds, etc. – hoping to buy it back as soon as the market falls further. There is a good chance that B does not know what he himself wants, he questions will also be vague and exploratory! So suddenly the market reaches lower levels…BUT the shares that B sold had not really gone down! He is really at his wits end.

What was this story meant to say?

Investing will involve pain

When there is panic, fear, selling and the voice on the television channels are MORE shrill – the best thing to do is to switch channels!

Just relax. Accept the fact that you will have some painful days. Better to tolerate a headache rather than pop a pill. Learn pain tolerance – physical or mental!

When things change (we are not saying whether!) – you will look smart! So keep investing….do your SIP…and chill.

Do I know whether the market is near its bottom?

No. Do you see me anywhere giving gyan?