It is Vijayadashami. I wish to remind you of something from a few years ago.
“Can you please suggest me some mutual funds which will give high returns over the time next 5 years?”
“Please tell me mutual funds that can give me at least 30% returns.”
There are several similar queries that I received in the past few years.
What is it?
Unrealistic expectations!
In other words, Greed!
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“I don’t want to see even a single rupee down in my investments.”
“…don’t want to invest in equity.”
“My portfolio has 37 schemes.”
What is it?
Fear!
Sometimes, fear of losing and sometimes fear of missing out (FOMO)!
Greed and fear are two of the many heads of Ravana in your life.
In 2016, I attended a conference where Prof Sanjay Bakshi, one of the foremost authorities in India on Value Investing, made a presentation.
He mentioned that to succeed in the long term, 3 key traits are required.
- A growth mindset
- Willingness to delay gratification (that is immediate benefit or pleasure)
- Capability to suffer short term pain
These 3 key traits are visible in all successful entrepreneurs. Not just entrepreneurs but investors too.
Let’s talk about delaying gratification. In simple terms, can you wait?
I don’t think I can explain it better than this video.
A child is offered 1 marshmallow (apparently, it’s a sweet that children really love). However, the child is told that if she can wait for 15 minutes without eating, she can have 2 of them.
What does the child do? Let’s find out.
Can you delay your gratification? Can you not spend money now and instead invest it to receive a higher value of the same money in the future. Can you wait?
Replace the marshmallow with money (Rs. 1 lakh today) and 15 minutes with 6 years (Rs. 2 lakhs) and then let’s see what your answer would be.
Willingness to suffer short term pain is yet another critical element. If your investments are market linked then to see them go yo-yo in the short term requires some courage.
Just google Sensex Chart and then play with the time horizon – 1 year, 5 year, max. and you will understand.
What will be the other name for this wait?
Patience. Investors also recognise this as “time in the market”.
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Going back to Prof Bakshi, he gave an example of Jeff Bezos and his company, Amazon.
I am sure you have heard and read enough about Bezos. I am equally sure you have shopped at Amazon too. Now, I want to point out something very important that Bezos says.
Bezos said that while investing or building a business, most people tend to have short term horizons – 1 year, 3 years, may be 5 years. Now if you were to simply double that horizon to say 10 years, you would be in totally a different league. The quality of your decisions and the things that you decide to do would undergo a complete change.
Bill Gates has said that we overestimate what we can achieve in 1 year and we underestimate what we can achieve in 10 years.
If you can get this inside your head and your being, you will be closer to your most powerful tool – Knowledge.
Well, today is your day. Symbolically, it is the day when Ravana was killed by Ram.
Yes, today, use the arrow of your Knowledge to overpower Greed and Fear.
Go beyond the symbolism, pick the bow now, aim and shoot the arrow. Today. Everyday.
This Vijayadashmi, may you win!
Between you and me: If you have read this post 2 years ago, what’s the progress you have made? What are you going to do now? How will you kill your Ravana?
Nice article vipin, very informative and useful for all investors
I remember what carl Richards said ‘don’t invest based on how you feel, invest based on what you know’
Very difficult to keep emotions in check when market is falling, especially if we are not aware of it
True that Girish. Thanks.