Grow up into a Better Human to be a Better Investor

Off late my son has been asking me just one question “Did you write something new for your blog?” And answering this question incrementally with a ‘NO’ was getting unbearable. This pressure felt worse than any sales target I would have ever undertaken. I asked him in jest that what topic should I write on and he says ‘Demonetisation’. It took a while for the thought to sink in. And serendipity happened;  Modiji! Hamaara Desh sach mein aage badh raha hai!!!  What can be better than a Punjabi son having a discourse with his Mom not about Aloo ka paranthas or Rajmaa Chawal but Demonetisation.

So I decided to write a note to my son, on the ‘Donts’. Things which we tell him but which perplex him. Things which we hope will make him a Better Human. Before you decide to log off thinking, O No! There she goes with her sermons; damn I get enough of them from my Mom, Dad, Spouse, Boss and my Dog….. WAIT!!

Serendipity also happened when I realized that how similar it is, the principles on which you can govern your Life & Investing style. Yes, fundamentally analogous it is to be a Better Human and a Better Investor. Did you notice that I am using the words “Better Human” instead of “Being Human?” I can’t infringe on one Mr. Khan’s copyrights also I have no driver to bail me out in case I get into some road accident.

NOTE TO A SON FROM HIS MOM    :     DO THESE ‘DONTS’

Son, do not get bogged down by what your friends do or don’t. Do not let yourself be defined by others. Try to build your own thoughts, independent of what your friends think. Do not seek affirmations and confirmations from all and sundry. A handful of well-wishers are enough. Trying to please everyone will be suicidal for your personal growth.

Likewise; In Investing, do not buy or sell based on what your friends, neighbor or that fancy stock guru is buying. You do not know their realities. You do not know their risk appetite, information ratio, maneuverability, asset allocation, incentives involved in doing so. Actually you know nothing about those whom you wish to imitate. Robert Cialdini has described this behaviour as ‘social proof’. It is the tendency to see an action as more appropriate when others are doing it. Remember, it may not always be the best for you.   

Son, do not be in a hurry to grow up. You are always asking me when will you get independent, when will you make money, when will you be involved in the discussions which we adult partake while asking you and your brother to go to the other room?  Some things take time. Growing up is a process. Enjoy it every day. Your science book explains how a seed turns into a sapling, then into a shrub and later into a tree. Some seeds do wither away, not all will turn into a tree and bear flowers and fruits.  We nurture you, support you, love you and at times admonish you; know that this is all a part of growing up.  You do not realize but at every stage you have your own set of responsibilities, independence and authority. If you keep comparing yourself with us grownups, it will only add to your misery.

Likewise; In Investing do not be in a hurry to see your investments grow. Investing is a process, a journey towards your financial well-being. It is not a journey towards building an X amount of retirement corpus but a journey to achieve financial independence. The sooner you achieve the better it is. Not all your investments will pay off. Some may wither away; some will grow exponentially to bear fruits of your patience and discipline. But it is all well if it ends well. Worrying over every investment and why it went right or wrong will only add to your misery.

Son, do not wile away this precious time. All play and no work also got Jack nowhere. Remember, the ant and the grasshopper story? Where the ant works tirelessly through the summer while all the grasshopper does is play, sing and dance only to learn the value of hard work when winters arrive. I would like you to twist the story a little. Be the ant many a times but do become the grass hopper too sometimes. The fine balance is a difficult one to achieve, but then who ever said that Life was easy? Also, take care of your belongings. Don’t be careless.

Likewise; In Investing average investors can only earn a finite amount on their investments. There is no substitute to grow your wealth but by saving more. Do yourself a favour, watch two shitty movies less in a month, skip an expensive meal at a fancy place at times and put that money to good use. Take care of your money, because if you don’t, no one else will. A famous artist Rihanna filed a suit against his manager for swindling away her cash and he had this to say about her “Was it really necessary to tell her that if you spend money for things you will end up with things, and not the money?” Pretty much sums up all you need to know. Things don’t makes us happy, experiences do. The trick is not to get off the Hedonic Treadmill at once, but keep reducing the speed and finally someday you may not feel the need to be on it at all.

 

Son, do not get too attached and emotional about your friends, mates, belongings. It only hurts. This is sheer experience talking. People around you who you think are your ‘friends’ will change. Situations will metamorphosize.  Let go. Destroy your most cherished ideas by confronting them. Be honest with yourself in the least if not with anyone else.

Likewise; In Investing do not fall in love with any of your investments. Investing environment will change. Views will change. Stocks, sectors, asset classes which made fabulous returns in the past may not do so in the future. Confront your realities. I know a friend who has made tremendous net worth on Real Estate in the past 15 years, is still in denial. He still thinks it is the best place to make money. May be he is right, but if only he was willing to be a little more open to other investment ideas, he would not be currently stuck with illiquid properties. We know enough stories about how we expect some dud stocks to turnaround but some stocks will never go back to their glorified prices even when the index achieves newer heights every day.  

Son, do not show dis respect or disgust towards anyone. This includes not just us your parents or grand-parents. It includes your teachers, your extended family, the maids, drivers or random people in the park. I know this is idealistic but at least try.  This beautiful aphorism by a Jesuit priest Baltasar Gracian “The wise are the least tolerant, for learning has diminished their patience” is true. But at this raw age you are far from being wise, so learn tolerance.

Likewise; In Investing respect the opinion of others around you. Learning can come in from any corner, from that new intern in your office, your pantry boy or from your fiercest competitor. Above all, respect MARKETS. The day you are too sure of the directions which the markets will take is also the day you can celebrate as your Fools Day. And try to reduce the velocity of this celebration. The best investors are also the most humble ones. So short Hubris and long Humility. 

Son, do not confuse Success with More Medals or Money.  But, Success equals to Happiness. It is perfectly ok to come second in the race, as long as you know you tried your best and are able to work harder the next time instead of saying that you can’t do it. It is ok to have stage fear while you are up there reciting a William Shakespeare poem as long as you stand upright and are ready to recite one more, the next time too.

Likewise; In Investing do not confuse success with a higher CAGR on your portfolio or with your ability to identify more and more multi baggers in the stock market. To grow in life, one needs to push themselves to get out of their comfort zone but in investing, it is imperative to operate within it. A good night sleep is the best return on your investments. Never compromise on it while maintaining your discipline in the markets.

And lastly, this is something you need to DO. Develop a hobby. It could be a sport interest, an art or a craft. It can act as a great stress buster especially when you grow up and are absorbed by worldly pressures or pleasures. Going back to your hobby is like going back to the one you love. You may ignore it, exploit it, use it, abuse it but it STAYS with you and calms your riled nerves when you need it the most. Your hobby truly loves you back in return. So have one. 

Some think Investing is a Science, some think it is an Art but I have always thought that Investing is a CRAFT. Investing is a craft as it can be improved with practice. The finer nuances of investing may be known to many but followed only by some. Investing will test you, your emotions, your strategies; your best laid plans and ideas. It is only how you hone this craft and improve it every day will set you apart