S A L E on Dalal Street!
- Jayesh Gala
- Dec 21, 2017
- 2 min read
It’s not only the Head that determines the Investment Success! It’s also the Stomach!! Its how the Investor behaves after he/she has acquired the Financial Assets. Let me explain one of the common irrational behavior from financial world.
Ajit is making monthly contribution via Mutual Funds for his retirement plan since past few years. His retirement is still 15 years away. Things were good when the market was going up, but the past few months the market was going down and down. Ajit got nervous as his recent contributions were making notional losses. So he met his Mutual Funds Advisor Jayesh.
Ajit – I want to stop the SIPs and restart only once the market stabilizes and turns around!
Jayesh – Hmm, let me explain to you what you are doing here. I know you like Raymond’s, you buy most of your formals there. I believe it has big sale every July. Next time it has a big sale, go there and choose multiple pairs of shirts and trousers, clothes that you really love and want. Take those outfits to the clerk at the store and say “I really love these clothes and want them. You keep them aside; I am going to comeback and pay for them when the sale is over!”
Ajit – That’s silly!
Jayesh – Well, that’s what you are doing with your Investments!
Most of us know that Equity as an asset class is the best performer in the long run, say 5-7-10+ years. It gives meaningful inflation adjusted returns. But Equity is highly volatile and that is good! It gives enough opportunities to buy in bargains. But when the correction sets in our rational side deserts us. If you want to own good Portfolio of Stocks or Mutual Funds, you should buy more aggressively when they are on bargains.
Next time you see minus sign on your cherry picked Stocks / Mutual Funds, think SALE !
Feel free to share the story with people who may be interested in investing patiently in Equity for long term :)
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