Do you want to be a part of the Mahabharat of Investment?
Then first identify who you are- Bhishma, Vidura, Dhritarashtra, Karna, Bhima or
Arjun and then look at the strategy you could choose. I am only highlighting
these 6 characters – all positive characters. I am not evaluating Duryodhana,
Shakuni or Shishupal!
Bhishma: You are the one who has taken a Bhishma Pratidnya-
“ I will only invest in Real Estate” “I will not invest in Equity” “I will
invest in FDs”. While each asset class has its pros and cons, a Bhishma who
invests in FD would have to be watching like a lame duck during the Bull run in
Equities or Gold. Just like Bhishma, who, due to his Pratidnya could never
ascend the Throne of Hastinapur even upon the death of his step-brothers –
Chitrangada or Vichitravirya or despite his grandsons Pandu and Dhritarashtra
being disabled.
Vidura: You are the most intelligent and capable of
advising most people. But when it comes to your own self, you develop cold
feet. Either an inferiority complex or the supposed unavailability of requisite
funds is preventing you from pursuing your own investment plans. Just like
Vidura- who was the most wise and capable person, but could not take over the
reins because he was born to a Servant-mother. Also, he could only helplessly
watch when Draupadi was being disrobed!
Dhritarashtra: You are blindly attracted to the
pomp and show of Relationship Managers from various high profile Banks –just as
Dhritarashtra was blind towards his son, Duryodhana. Whether the RM of the Bank
sells you an expensive but poor performing Insurance Product or a PMS which has
average performance but gives him a huge commission, you would still blindly
trust him, because he is employed by your Bank and hence could do no wrong.
Karna: You are the most skilled and accomplished, but
unlucky! You understand various assets like equities, gold, real estate and
techniques like rupee cost averaging (SIP), value averaging (Flex STP), asset
allocation etc. But always end up investing at the wrong time! You invested in
Equities in 2008 at 21000 levels, thinking they would rise to 25000 and lost.
You invested in Dynamic Bond Funds last year, hoping to cash in on the rally
that would accompany lowering of interest rates by the RBI governor. However,
instead of falling, the rates went up! Just like Karna, who had his Kavach
Kundala stealthily being taken away by Lord Indra or Parshuram cursing him that
he would be incapable of using his weapons when he needed them most!
Bhima: You are extremely ambitious and demanding. When
Equities give an average of 17-18% returns, you want 25%. While most FDs are
giving 9%, you would want 11%. At times you may even have your way, but what
could happen is that people would be scared to advise you and hence would
suggest conservative products to you rather than optimal ones, fearing that a
slippage on returns / risk could invite your wrath!
Arjun: You are the best because you always wanted to be
the best. You understand most assets and also market timing. Most of the time
you even make it big by hitting the bulls eye. Usually by investing in Equities
when markets are at 8000 levels and then rise to 22000 or in Bond Funds when
yields are at 9% and fall to 7%. Where you could get stuck is in the following chakravyuhas:
-You need to pay your next installment for your weekend /
second home and need to withdraw money from your FD yielding 10% or from your
MFs when the Sensex is at 8000 like in Oct 2008.
- You need to withdraw from the corpus meant for your
child’s education to pay for your parent’s Hospital Bills
- You have just lost our job and have not planned for it and
now the Bank authorities are at your doorstep to recover the car that you
bought on Loan!
If you are stuck in a Chakravyuha, you end up being
an Abhimanyu rather than Arjun!
So, what are the solutions for the above Mahabharat
Characters?
Bhishma: He had a boon- he could die when he wanted to-ichha
mrityu. Hence, he created a situation where Lord Krishna rose to kill him, but
he chose to die to an arrow shot by Arjun. In investment, the equivalent of
iccha mrityu is “no exit load”. Even if you are in a FD, you should have easy
exit and minimum exit penalty. If you are invested in Equities, those must be
in stocks which are easy to liquidate and don’t suffer much loss even in a bear
market.
Vidura: You may not have much to invest but so what, start
small – SIP of 1000/2000 but invest over long periods of time- 10/20 years, and
keep on revising the SIP amounts as and when possible. Keep your unnecessary
expenses in control so that you get more money to invest.
Dhritarashtra: He was not just blind but also
obstinate. He hardly ever listened to Bhishma or Vidura in matters of
Governance and kept on favoring Duryodhana even when he knew that Pandavas were
superior. You should start asking questions to your favorite Bank RM or CA.
Demand performance charts/regular reports from him to ensure that you are on
the right track as regards your investments.
Karna: As much as possible, keep patience- you may have
invested at wrong times, but so what? Time cures most illnesses. Even if you
are stuck in Equities where you invested in Jan 2008, look at them now, after 6
years-mostly you would have recovered your losses and even made some profit.
However, if you are stuck in Sectoral Funds like Infrastructure or Power, you
need to wait a little more!
Bhima: Calm down. Introspect. What is the risk you are
taking to get higher returns? Are you investing in a 12% Sahara FD when a HDFC
FD of 9% would be better? Are you investing in a FMCG / Banking Fund when you
should be investing in a Diversified Equity Fund?
Arjun: Even Arjun required a teacher like Dronacharya and
a Sarathi like Lord Krishna to guide him to victory. Like Arjun, hire an
advisor who would be your Sarathi in bad times as well as good. Let that
Dronacharya advise you on where and how much to invest even when you are aware
of most things. After all, it was Dronacharya who taught Arjun to be the best
archer and pierce every Chakravyuha!
Happy Mahabharat Investing!!