Conversation with an Investor – Part 2

“Have Patience” is easier said than done, especially when it comes to investing in Stocks or Mutual Funds

Conversation between an Investor and her Investment Advisor

Investor: I would like to stop my monthly investments for the time being.

Advisor: Any particular reason?

Investor: Markets are down and our portfolio is not performing.

Advisor: That is why we planned for long-term investments (5 years +) when we started 2.5 years back.

Investor: Yes but what if it keeps going down further? I think I should wait and watch before starting the investments again.

Advisor: You can do that but then your portfolio is unlikely to generate good returns. You may in fact witness losses, even after long term investment (5 years +).

Investor: Why so?

Advisor: Because you are unintentionally planning to invest only when the markets are high. And you want to stop your investments when you are getting Stocks and Mutual Fund schemes at a discount.

In fact, this is a good time to invest more than what you normally invest.

Investor: Really? I am not so sure… 

Advisor: Okay, let's take 2 examples.

1) You are a manufacturer of steel products. One fine day you get to know that there is a 25% discount on raw material in the market because of the oversupply of steel. Would you close your factory or fill up your warehouses?

Investor: I would obviously fill up my warehouses.

Advisor: Okay, second example...

2) There is Sale going on in Shopper Stop, Big Bazar, Amazon, Flipkart.. would you plan to buy more or would you wait for Sale to get over so that you can buy at higher prices again?

Investor (now understands where the conversation is going): I understand what you are trying to say but it hurts to see my portfolio losing out all the profits we made in last 2-3 years and it might go in losses very soon if the markets keep on falling like this.

Advisor: I understand your pain, as I have my investments too in this, but if markets would always go in one direction, don't you think every individual would invest in Stocks and Mutual Funds?

It is these fluctuations which very few investors are able to bear and that's why very few are able to create wealth in the market.

Most of the world's wealth is owned by just the top 2% of the people. And the majority of the population complains about Inflation (??????) all their life, as their investments are not able to beat inflation.

Where do you want to be, in Majority or 2%?

Investor (now smiling): Of course 2%

Advisor: Then my friend, as the saying goes, 'When the going gets tough, the tough get going'.

Investor: So what shall I do?

Advisor: Keep investing regularly and focus on your financial goals. This is not the first time that the market is down and not the last time as well :-)

…………………………….

“Common sense is not common” holds true in investing for sure. We look forward to the discount and sale season when it comes to shopping but do not follow this simple logic while investing.

Investing is all about common-sense and about keeping patience. And both these qualities can be developed with practice. 

#stockmarket #patience #advisor