We were hearing some "old" music and my wife turned to me and said, "The music we grew up with stayed longer on the charts because there were not that many new songs. Now, there are so many new songs and so many new bands and singers that "new" music does not stay on the charts for long any more."
I glanced at her and nodded.
There is a golden rule for a husband in today’s modern day marriage: Say, "Yes, dear" or nod your head in approval. Your marriage will be on a more solid footing.
Having said that, my nodding was not a forced, follow-the-golden-rule nod but a nod of genuine agreement.
"And", she continued, "it is the same with clothes. They have fashion seasons and every fashion season is shorter so they encourage you to add to your wardrobe more often. All this marketing - for what?"
My wife is not a shopper, so this was not a hint to buy clothes, for sure.
I thought about what she was saying and realised that she was onto something.
Something to do with the world we live in.
Investing in Indian stock markets: a fashion? Let’s take the field of investments: investing in the Indian stock markets. Why is it that we cannot sit patiently with a few stocks and watch them evolve over a ten or twenty year time horizon? Maybe make some changes to some of the stocks we own in our portfolios every 5 years or so. Sure, if a really new idea comes along, and you like the stock of the company involved in that business, go ahead and add it to your portfolio. But, generally, if you did your homework well before you invested in a stock owning the stock for a long time could work well.
If you want extra-ordinary returns,
there's no better place to look than small cap stocks. Read On...
But the system won’t let you.
The system - the financial system geared up to service the investor - is not built on a "let the client buy only once" strategy.
The financial system is geared to help you make profitable investments in the Indian stock markets by investing in a list of Indian stocks or Indian mutual funds.
And then help you change your mind the next day about what you should really do to make profitable investments by giving you a new list of Indian stocks and Indian mutual funds.
And then help you change your mind again before the week is over.
For each time the system helps you change your mind, that creates an action: the selling of one stock and the buying of another. Or the selling of one mutual fund and the buying of another mutual fund.
They are making you buy what is "fashionable".
Your investment portfolio for the Indian stock market is your fashion statement.
Just like owning the CD of the newest song.
Or owning the latest style of shoes or clothing.
So, when you go to a party to meet the parents of your daughter’s school friends, you can discuss the latest fashion statement in investing.
Investing in Indian stock markets: or in your broker’s wealth. You are not really investing in the Indian stock market anymore.
You are investing in the wealth creation for the people in the system.
Every time you trade, you generate a revenue stream for your broker. You may have a loss or a profit on your latest, fashionable trade. That is your problem.
They have a guaranteed profit.
Come to think of it, there are two rules to be happy and successful:
Rule # 1: say "yes, dear" to your wife and nod your head in agreement.
Rule # 2: say, "no, thank you" to your broker and do not nod your head in agreement.
Most people seem to treat their broker as their wife - and nod in agreement to everything they say.
And they seem to treat their wife as if she were a broker - and do not listen to their views.
A recipe for disaster: emotionally and financially.
Suggested allocation in Quantum Mutual Funds
Quantum Long Term Equity Fund
Quantum Gold Fund
Quantum Liquid Fund
Why you should own it:
An investment for the future and an opportunity to profit from the long term economic growth in India
A hedge against a global financial crisis and an "insurance" for your portfolio
Cash in hand for any emergency uses but should get better returns than a savings account in a bank
Disclaimer: Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information"
Note: Ajit Dayal, the author is a Director in Quantum Information Services Private Limited and Quantum Asset Management Company Private Limited. Views expressed in this article are entirely those of the author and may not be regarded as views of the Quantum Mutual Fund or Quantum Asset Management Company Private Limited or Quantum Information Services Private Limited.
Mutual Fund Investments are subject to market risks. Please read the offer documents of the respective schemes before making any investments.
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In the domestic context, despite having been in existence for a while, Exchange Traded Funds (ETFs) have never quite captured the investor’s imagination. This is in contrast to the scenario in markets like the U.S. where ETFs are quite popular.
»Lessons from the master - XXXVI
In the previous article , we wrote about why Warren Buffett prefers long periods of inactivity when it comes to making investments. Let us go further down the same letter (1996) and see what other investment wisdom he has on offer.