Why am I doing a post like this? Why am I saying that some people should not invest in equities?

Well the smarter investors know that while investing looking for certainty is FOOLISH. The smart investor knows that the SMART investor lives with uncertainty. He knows that equity returns fluctuate…and there is standard deviation of course!!

However some of the investors need confirmation. CONFIRMATION that people want BEFORE they invest is just awesome. So if in an investing span of say 50 years you spend 45 in getting confirmation of what will work, when will you invest?

The more qualified a person is, the more the questions –

1. ‘Subra you are saying on an average equities will work but will it really work for ME?’

Frankly there is no way how I can answer this question. I can only say that as a family my dad has been in equities since 1956 and I have been personally in equities since 1979 and it has worked. I do not know how much return I have got on a daily, weekly, or monthly rolling average without reinvestment of dividends.

No, I am not a research scholar doing 100 year IRRs on equity as a class of investing across 30 countries. No, I do not need to. Hey, but I invest.

2. I am sometimes a saver, an investor, a speculator, a trader, a long term investor, a short term investor, – I normally know when I do a trade why, how much and in what role I am doing it. For e.g. I have Cummins (when I originally bought it, it was called Kirloskar Cummins) and have been holding it for 20+ years. However in the past 10 months I must have traded in and out of Cummins about 4-6 times) and thus many a time there is a convergence. Ultimately the question is ‘does it make money’ and is it ‘tax efficient’ .

3. Sometimes I am a growth investor seeking all the value in the growth that is happening. Like buying Bharti Airtel at 80 when it was making huge losses. The value, really came from growth.

4. If I say you have 80% chance of making money, you worry that out of 5 times once you will lose. Sure but I have to tell you that there is a difference between 100% certainty and 80% probability.

4. Will the same strategy work for me over the next 25 years of my life? frankly I do not know. However my portfolio is still not in the ‘permanent retirement’ no need to act stage. I will go there ONLY over the next 20 years – maybe 15.

If you wish to invest in equities – maybe a small part – and you wait for PERFECT INFORMATION (no clue what it means from a usage point of view) I hope you remember Operations Research.

Do you realize that EVPI (Economic Value of Perfect Information) is NIL?

So then, sorry, equities will not work for you.