Good times do come, but they do not last. What lasts are the dreary times that yield you small gains, writes Tensing Rodrigues.
Do you find yourself at the end of the road with stock markets unpredictable and the FD rates unattractive? Hold your breath, and your frustration; was it better any time before?
Yes, I can remember better times. In the early nineties, or rather, just at the turn of the eighties, the BSE Sensex zoomed into the seventh heaven, turning every doodhwala into an equity analyst. I remember, I had just bought ACC, and was getting rather bored not seeing any appreciation. And then suddenly it started moving. From 200 it went to 500, to 1000, to 5000, till I sold it off at 9000, as I was beginning to feel giddy at that altitude. I sold some of my other holdings as well, as I was finding it difficult to accept the truth of my net worth; I put the whole thing in bank for a paltry interest, and decided to waste my time fishing at the neighbourhood creek. Well, I did something more with my windfall.
Knowing that I had a lot of money – I suppose it was visible on my face, some of the acquaintances suggested I invest in company deposits and plantation companies; they were paying something like 16% interest. But the gifts they gave were even better. I collected about 50 bed sheets, a dozen umbrellas and tumblers of all shapes and sizes beyond counting.
But my good fortune did not last very long. In a matter of months, the stock market crashed; and the companies who had taken my deposits wound up one by one; and the trees in my plantations withered mysteriously.
Good times do come, but they do not last. What lasts are the dreary times that yield you small gains; but then those small gains keep coming, year after year, after year. Exactly like fishing at the creek. Once in a while a big fish gets hooked; out of the dozen times that I have had that stroke of luck, at least half the times I have not been able to haul the fish up; either my line has snapped, or the fish has slipped; once I almost stumbled over the stony edge of the creek.
Unpredictable stock markets are not a bad thing. Why the hell do you want them to be predictable? Look here; if you found them predictable, so would your neighbour; and his neighbour; and your doodhwala; and your newspaper boy; and that guy in your office whose face you cannot stand. Now, if everybody predicts the market, how will you make money? The gains from the stock market come, the experts say, from your superior information about the market; I say, from your superior luck.
But you cannot be lucky all the time; sometimes your neighbour will be lucky; sometimes your newspaper boy will be lucky; and sometimes that guy in your office will be lucky. But there is a way of beating the luck. Go fishing every day at the creek. Sometimes you will catch big fish, sometimes no fish; but on an average you will have something to show your wife that you have not been squandering your time at the bar. In other words, invest regularly in the stock market; on a weekly basis, I would say.
Do not look at the Sensex; let it go anyway. Sensex is sensex; its first name may be sense; but its family name is sex. So just put it out of your mind, and go on investing, as patiently as you hold your line in the creek. Do a SIP in some stocks; but better still, in some good equity schemes of MF. Of course, you will have to have patience. Results will not show quickly. Count your chicken only after 5 years or more.
Just by way of some hope expressed in a lighter vein, let me share with you an excerpt from a forwarded mail I received this morning. “Dear Britain, should you have voted to leave the EU by the time I wake up – don’t worry – I have a solution that should relieve both remainers and leavers equally. A moment comes, which comes but rarely, when we step from the old to the new….I’ve cracked the #Brexit conundrum! … Cameron needs to immediately apply for Britain to become a Union Territory of the Republic of India- it makes a lot of sense for the British! Worried about jobs? India’s economy is growing 4x faster than Europe’s and will overtake the entire EU’s sometime in the 2030s – becoming twice the size of the EU economy by 2050.” Have a good laugh and blow your blues away!
Coming to the bank FD rates, well, at around 6.5 percent they are not too bad in India. Do you know what FDs pay in Japan – around-0.10 percent; in US around 0.5 percent; in Germany around 0.00 percent; in UK around 0.5 percent; in Singapore around 0.44 percent; in Australia around 1.75 percent; in China around 4.35 percent; in UAE around 1.25 percent. Well, there are countries which pay higher: Turkey and South Africa pay around 8 percent; Brazil and Mozambique pay around 14 percent; Argentina and Ghana pay more than 25 percent.
Bank FDs are not really meant to create wealth; they are for conserving wealth. That is, they protect your capital and pay an interest just about to neutralise inflation. The only asset that can create wealth is equity. That is because your equity investment goes into creation of value; it helps the company to acquire capital that it can deploy to produce goods. Fixed income securities provide you with the buffer to sustain, as the equity values heave up and down. So, only this part of your portfolio – the buffer – you need to hold as bank FDs; and that part which you feel you may need to liquidate in immediate future – say in less than 5 years – you should hold as bank FDs. The rest should go to equity. If that is got right, there is no reason to be despondent.
