The forgotten virtue called patience

I met one Madan Rao in a training session. He sought my consultation on a friendly basis post the session.

I met one Madan Rao in a training session. He sought my consultation on a friendly basis post the session. I remember him quite well because of the unique nature and style of his investment. He was 52 and had his financial goals crystal clear in his mind. He said that his priority was the wedding of his two daughters and he had estimated a cost of Rs 20 lakh as on today for each of them. So he said he would need about Rs 50 lakh in about 8-12 years time accounting for inflation. He said that the daughters wedding in his community was an expensive affair and naturally like every parent,he wished that they be wed in good,well-to-do households and that the bridegroom was well educated,financially stable and independent on his own accord etc. And he also wanted to know if he had enough to secure a completely non-compromising retirement.

Rao is a commerce graduate and belongs to themid-cadre of management. He had worked for about 25 years in the same company,started from the shop floor,had promotions as per the company policy and will now retire in about 8 years.

I requested him to bring along his income/ expense details and his asset/ liability details. This is what I found. He saved about 30 per cent of his income,had no debts or liabilities,for assets he had a small house in which he would continue to live post retirement,an accumulation of about R8 lakh in his PF and superannuation fund,PPF of about R5 lakh,FDs of about R4 lakh,postal savings of about R3 lakh and maintained a bank balance of about R50,000. He was a simple ordinary employee of a large public limited company employing thousands of people. I figured his lifes savings were about R20 lakh and his goals were far out of his reach. I was generally concerned and in my mind I was preparing how I would approach his situation and tell him that with what he had,his wishes would remain wishes.

As the conversation progressed I was trying to salvage the situation and discussing various options. He requested me to have a look at some of the equity shares he had purchased over the years. He took out a four page hand-written list of about 70 odd companies in which he had share holdings. He told me three things before I started scanning through that list. First,that he came from a very conservative matriarchal background where equity investment was considered gambling and generally looked down upon. Second,he had permission by the women of his family to invest in shares only if he promised not to trade and speculate.

So Rao is allowed to buy but is not allowed to sell. Third,if at all they sell shares,it will be the decision from the women camp. He agreed to all the imposed conditions because he understood one philosophy which is that if his investment turned out to be in a good company it would grow for decades and pay him dividends and make him rich. So he invested only in IPOs and subscribed to rights of those companies from whatever meagre savings he has had over the last 26 years. He started investing from 1980 and has not sold any shares till date. I started scanning the list and was generally disappointed to see missed opportunities,many companies that had shut,quite a bit of money lost. With the shares that were still active I could see the market value of his holdings in the range of Rs 20,000 to Rs 1 lakh. There were few company stocks he had that were in the range of R2 lakh to Rs 4 lakh and suddenly I could see seven figure market values for more than half a dozen of his stocks. I was shocked and could not believe what I was seeing. Of course I asked him to verify correctness of what he had written. I was wondering if he had written investment value in the quantity column. He showed me his demat statement.

Guess what? I saw his total value at the bottom of the fourth sheethis stock portfolio was worth R5.4 crore. He was asking me to comment on his holding and I was awed with amazement. His total investment cost in this portfolio was barely R1.5 to 2 lakh. Performance of his portfolio can put most of the savvy fund managers to shame. All said,he is not disappointed at some of his losses,he watches his portfolio regularly,the family has consented to sell partly at marriage time and balance on retirement.

I am not commenting on whether what he did was right or wrong; for me it is simply proof once again of what patience can do for you in the stock market.

Author is Director,Transcend Consulting kartiktranscend-india.com