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Dhokla, Dosa or Samosa... What's your investing type?

Apr 13, 2015

In this issue:
» The one common thing among top Indian billionaires...
» Why did mutual funds see such high redemptions in FY15?
» How did the Indian markets close today?
» An inspiring quote by Charlie Munger...
» ...and more!

00:00
  Chart of the day
If your son or daughter came up to you one day and said that they had found the person they want to marry, what would be your immediate reaction? We don't know about you but most conservative Indian parents would ask about the person's family and cultural background.

'I don't mind if my daughter goes for a love marriage. But I just hope she finds someone from our community,' we have heard many parents say this.

For those who have found the 'love of their life' outside their communities, any resistance from home may come across as totally irrational parental terrorism.

The young lad would say something like this - 'I love the girl, dad. Isn't that enough? How does it matter where she comes from? I want to marry her; not her ancestors.'

While such sentimental, passion-filled exchanges may make for interesting Bollywood fare, the truth is that when you marry a person, you do, in a way, marry her ancestors.

Studies in social psychology show that children are not 'blank slates' when they are born. In their genes, they do carry the traits, tendencies, learnings, thinking and behavioural patterns of their parents and ancestors. After birth, our minds are shaped by family dynamics, the prevalent societal forces, the economic landscape engulfing us and the education that we receive.

So our family roots and the socio-economic environment that we grow up in do play a key role in making us what we are. Now the question is - Do these factors affect our success and fortunes in life? It seems they do.

We came across an interesting piece in The Economic Times that puts forth an interesting point. Do you know what is common between Dilip Shanghvi, Mukesh Ambani, Azim Premji, Uday Kotak and Gautam Adani? Yes, they are all among the richest people in India. But there is more... They are all Gujaratis! And they all make it to the list of top 10 Bloomberg Billionaires from India.

What Is The One Common Factor Between These Billionaires?

Does being a Gujarati have anything to do with their success?

Let's go back in time. Gujarat, being on the Western frontier of the country has a long history of trade and commerce. As per Wikipedia, there is evidence that Gujarat had economic ties with Egypt, Bahrain and Sumer in the Persian Gulf during the time period of 1,000 to 750 BC. With centuries of trade and commerce behind them, Gujaratis take to business as if it were their most natural instinct. A social science professor, Avathhi Ramaiah, makes a valid remark, "Historically, the communities that have been involved in a profession have had the traditional advantage of knowing the integrity and nuance of that trade."

When we half-jokingly associate some attributes with certain ethnic groups, there is mostly an ounce of truth in them. For instance, South Indians are typically seen as geeks for whom mathematics is play. Is it a coincidence that one of three CFOs of the Nifty companies is a South Indian. Then, there is a general perception that North Indians are high risk takers. Interestingly, the founders of most of the leading e- commerce start-ups in India are from North India (Flipkart, Myntra, Snapdeal, Zomato, Goibibo and Ola Cabs).

While these are interesting observations, one must not take these stereotypes to extreme as they can sometimes be misleading and hamper impartial judgement. One cannot make generalizations about all people from a certain ethnic group. Belonging to a particular ethnic group in itself does not make you worthy of a fortune. It only means that you tend to inherit some traits and skill sets unique to that social group. And if applied well, it could make you successful in your chosen field. Also, one should try to learn the productive thought patterns of other ethnic groups. This could lead to wiser decision making and financial success.

Do you see a correlation between your ethnic background and your outlook towards business and investment? Which cultural habits and behavioral patterns are your assets? Which tendencies would you like to unlearn? Let us know your comments or share your views in the Equitymaster Club.

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03:00
Annual redemptions from equity schemes in FY15 are third highest in this decade, with redemptions in FY08 and FY11 topping the list. As the markets are running high on sentiments, profits are being booked and money is being taken off the table. As suggested in an article in Business Standard, there is also a good chance that this money is being churned by distributors so that higher commissions can be earned on closed ended schemes that have popped up in the rising markets. Your best shield against such unethical practices is to choose the mutual funds you invest in wisely.

But as an investor, unless you need money now or over next few years or are looking for diversification across asset classes, does it make sense to reduce your exposure to equities? We don't think so... After all, it is not easy to time the markets. Even if you exit at the peak, you are likely to miss the next perfect time to enter and miss the rally in the long run. History is witness that in the long run, despite the intermediate peaks and troughs, the stock markets have yielded returns way higher than fixed deposits, with the latter only lowering your 'real 'money in the future. Hence, even if the markets slide temporarily, as long as you have invested in fundamentally strong stocks, a correction will be more of a buying opportunity and will help to average your investment cost.

04:00
After a highly volatile trading session, the Indian stock markets ended the day on a strong note. The BSE-Sensex closed above the 29k-mark, higher by 165 points (+0.57%). The BSE Mid cap and BSE Small cap indices also closed higher by 0.31% and 0.81% respectively. Barring auto and realty, all sectoral indices closed in the green. The sectors leading the gains were healthcare, capital goods and consumer durables.

04:30
 Today's investing mantra
"Just out of our respective graduate schools, my friend Warren Buffett and I entered the business world to find huge, predictable patterns of extreme irrationality. These irrationalities were obviously important to what we wanted to do, but our professors never mentioned them. Understanding the problem of irrationalities was not easy. I came to study the psychology of human misjudgement almost against my will. I rejected it until I realised that my attitude was costing me a lot of money and reduced my ability to help everything I loved." - Charlie Munger

This edition of The 5 Minute WrapUp is authored by Ankit Shah.

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5 Responses to "Dhokla, Dosa or Samosa... What's your investing type?"

Ramesh

May 1, 2015

Its not a co-incidence that they are all Gujaratis. I dont know if i have to call it their Ethnicity, but i can definitely call it a "cultural" affiliation. This will also absolve me of projecting any stereotypes (thats bcos a South Indian, say, brought up for long enough in a Gujarati community will tend to think like one, and vice versa).

The background in which all the folks grew up does matter. Ofcourse, they are always exceptions to any rules or theories.

regards
Ramesh (South Indian :-)

Like 

Ashwin Pawar

Apr 14, 2015

Dear Sir,what's the similarity between Harshad Mehta,CR Bhansali,Ketan Parekh and Jignesh Shah?I would say even the best cannot be trusted with one's hard-earned money.what matters is ROI.please avoid such analogies.

Regards
AshwinPawar
Thane

Like (3)

C Sivachandran

Apr 14, 2015

I thought there are going to be three investing types being explained or some other investment lesson but found this useless. Could there be a greater risk than starting a 'Sudeshi Shipping Corporation' and compete with the East India Company in India during the British period? Please find out who that Indian was (north/south/east/west). I think equitymaster should rather bust all the myths like this.

Like (1)

Srinivasan.G

Apr 13, 2015

when a person from business family wants to enter business, he has more people to help him learn the trade and the family and friend circles encourage to go an try business. When you are from middle class and want to become first time entrepreneur, there are few people in your circle to learn trade and your family does not encourage you. Once can called this privilege earned by birth in to family.

Like (3)

Jitendra

Apr 13, 2015

Pls check. I doubt if Mr.Premji is a Gujarati

Like (3)
  
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