Patience and the art of equity investment

Research says that on an average a person looks at his/her mobile phone for 100-150 times per day.

Written by Parag Paranjpe | Published: May 27, 2013 3:34 am

When Facebook launched Home application for Android phones recently,they were sure that each time person looks at the phone,FB will be the first thing any one would look at. Research says that on an average a person looks at his/her mobile phone for 100-150 times per day. FB is simple leveraging on impatience of mobile users.

This an excerpt from a talk delivered by one of the last few gentlemen of cricket,Rahul Dravid. He talked about patience. “My wife and I have built a new home with a lovely garden,which houses lovely bamboo trees. I got reading on the Chinese bamboo and learned that the tree takes 5 years 3 months to grow to its whole height of 80 feet. Yet,for the first 5 years,you only see a tiny green shoot,but in the next 90 days,it grows into a full-fledged tree. But in those first 60 months it is growing its strong network of roots underground to support the tree.  In an era of instant gratification,we settle for shorter trees,but remember patience has its reward. These are your years of growing that strong network of roots but be sure when you finally achieve your success,people will call it “overnight success”. If only they knew of the Chinese bamboo!”

Patience also plays a vital role to succeed in investments,equity investment in particular. Let’s accept the fact that a typical Indian investor is not exposed to equity investments. For 60-65 long years we have been accustomed to investment product that gave predictable,stable returns. Returns that we can count on daily basis. Stocks were left to select few or persons with ‘gambling’ tendency. Equity culture pops up only during boom time.

As equity investor one has to understand that we are buying an asset class that inherently has volatility entrenched in it. But over a long period (say 10 year and more) this asset class has the best chance of delivering returns that are superior to other asset classes. The only thing that is required is good study (no substitute for it) and patience. Checking stock prices 100-150 times a day won’t serve any purpose except push us on a path that demands trading rather investing. It’s akin to digging the soil and checking roots every day after watering the plants. Either it will stall growth or simply kill the plant.

Equity investment demands patience; to go through downside,to bear pessimism and to overcome euphoria. Setting up financial goal,assessing risk,allocating assets and focus on end result is far more superior strategy than reacting and trading on every 5-10 per cent price movement of stock market. Stock prices on daily basis are simply reflection (or overreaction) of news about particular company. End of the day,however,it will replicate the profitability of the venture. The challenge is to ignore noises and focus on fundamentals.

It’s not difficult. Start with looking at your mobile for only 50 times a day.

Author is a member of the Foundation of Independent Financial Advisors (FIFA)

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