What hurts and scares you the Most?

Obviously it is the threat to the biggest asset of your life at that point in time. So you graduated in India, and you studied abroad, and you had taken up a job in 2005-6 in the CAPITAL MARKETS, AND had started investing in a large  capmutual fund in 2006. You were doing a princely amount of Rs. 5000 per month, which was a big cry from Rs. 1500 per month which you did in 2007. Not bad at all. You have accumulated Rs. 78000 (at cost) in your equity mutual fund, and all the remaining assets you have is Rs 9000 lying in the bank.

THEN CAME 2008….AND you lost 60% of your portfolio.

Exactly time for your Mom to have a mild heart attack – but you decided to get married..and migrate to India.

The market crashed 60%, your portfolio went down 40%…not bad, but suddenly you had Rs. 48000 in UNREMOVALBE EQUITY, and some loose cash.  Of course you had a father who paid for your tickets back to India..

Did the fall in the portfolio scare you? NO. of course not. You were more worried about you getting a job in India and you being able to make a career in finance in India (your visa was an issue too).

CLEARLY THE BIGGEST ASSET YOU HAD in 2008 was your ABILITY TO EARN MONEY using your fancy degree. Luckily for you, in 2009 a Japanese brokerage firm took you and gave you a good job as an Equity analyst and phew! you had a job paying very well, and life was normal.

You invested aggressively, your wife was an IT professional and she had a good job. He had a good job in bad bank!

Suddenly the IT company collapsed – the CEO had done a fraud, and her ESOP worth Rs 9 crores, was reduced to zilch. They were devastated.

He worked in a brokerage company owned by a bank. The Bank changed he CEO, a fraud was detected, and the husband lost his job, his provident fund, Esop – and he was back to zero. This happened in 2018, and he was devastated, really and completely.

What was at risk now? both of them were at high levels – even though they were young (39 and 37 is young) and now had a problem in finding a job. Their ‘reputation’ , being wiped out, paying a huge EMI and 2 kids in the most expensive school in Bandra (no no not BKC)was now haunting them.

His father had a fab pension (6 figures), but his inlaws had moved in with them. They did not have much money, and hence now our hero and heroine had to feed 6 people. Well their monthly expenses was about Rs. 12L including Rs. 5L pm on EMI.

Well. Now in 2020, they were still looking for a job. They had shifted to Delhi (his father had a spare house), children went to an ordinary school, they gave back the luxury flat to the bank – luckily it was his employer bank. They gave up their car, and were now using their father’s Zen.

btw do you think they were worried about their portfolio and its risk on their retirement plan? Hell, no.

No names please, but your worry is always…

a) for the biggest asset you have, not your portfolio

b) concentrate on the risk at hand

So at 23 you are worried about your career. Will you get a job? Will you get a visa? Will you get a job that you wish to have.

Also at 35 you are worried about your portfolio (something has been created already), your location of work, your  reputation, …and all this for your spouse also.

At 45 you are worried about your portfolio, your reputation (a drop here can ruin you), your business or your job. So if you are the owner-ceo of an amc, you are worried about a run on your fund – it can ruin you. If you are the professional ceo, you are not so worried about the run on the fund. You can always get a job in some time. However, the owner is almost always finished. Well this fear stays on from 45 to say 60 years of age.

At age 60 you are worried about your portfolio. Seriously no great damage can happen to your life, but yes there can be a dramatic change in life-style.

At 70 and above you should be worried about your portfolio lasting for at least 2 days after you die!

So when I lost money in 1992/3 my portfolio loss of course devastated me. However much worse was the fall in brokerage income in 1993/4. Luckily the CA practice related work was not at zero. Doing some corporate work, loan syndication…helped.

In 2008 of course I had more money to lose – I was 45 years of age – and I was lucky. I had exited some of the boomers – like Tata Power, LnT, Kotak bank, Chola….at super prices. So I got less hurt. I was in FMCG, pharma which had not participated. They participated in the next leg of the market. Phew.

In 2020, again got a little lucky – still sitting on cash. Creating trading income – the whiplash market movement was not there in 2008.

So at each crisis, actually, you are thinking of a different risk.