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Sunday, September 18, 2016

The Difference Between Hating to Lose AND Being Afraid to Lose(While Investing)

Over the years in my Banking and financial services career I have met(and keep meeting) many different kind of investors.Of them all I vividly recall a gentleman  - very aggressive in business,having scaled up his company to a turnover of millions in just a decade yet so timid in investing all that money he made that he could not think beyond Bank fixed deposits all the while knowing that his returns were net negative and not beating inflation!

I have also met retail investors who were filling to bet the kitchen sink on an idea that caught their fancy.

"Winning means being unafraid to lose" - Robert Kiyosaki,Rich Dad Poor Dad

Psychology I find is just as important in the field of investments as it is in business and sports.Most investors are more afraid of the IDEA of losing money than the actual loss.

So ask yourself this.....

A) Is the major part of your portfolio in low yield bonds ?

B) Balanced Funds,tax saving Bonds ,CDs ?

C) Have you bought Insurance products as an investment tool ?

I met a CEO of a small firm who had bought an insurance policy paying a premium of 1,00,000 per annum for 7 years and from the 8th to the 14th year the insurance company would pay him an annual gratuity of 1,35,000.So he pays 7,00,000 for 7 years and he gets 9,45,000 at the end of the 14th  year...!!Just do the maths...? I mean these are finance people so think about those in other fields.

Risk is in everyday living.Its all around.The secret is to take calculated risks and not being afraid to lose.


I would definitely not advise someone close to retirement to put all their savings in high risk equity,midcaps or sector funds,NCDs yet some amount of equity exposure is a MUST if you want to have enough at the age of 60 years to maintain your lifestyle.

Too many people live their entire lives being afraid of risk,being found out,comfortable mid - benchers since school days,happy with their anonymity.The sad part is that they do not even realise that they are not exploring their own potential.

I do not mean to preach.Had I known a decade back what I know today I could have comfortably retired to pursue my hobbies.Its very personal.

Yet the fear of losing makes people do complicated things which leaves them financially uncomfortable many years hence.

What is Luxury ? A fancy house?A Merc or a BMW or a Hummer?Latest gadgets?An endless list as it depends person to person

To me luxury is having the comfort of regular living without the daily pressure to meet deadlines and targets to survive.

As Warren Buffett has famoulsy said that one must create an alternate source of income along with your main source of livlihood  and one must always buy Assets.

That alternate source could be rental income,dividends,interest or creating a business that generates some returns.

It cannot be done without taking some amount of Risk.Research says that fear of public speaking is man's biggest fear but I feel that fear to invest in non - risk products is even greater,so although you may hate to lose ask yourself

AM I AFRAID TO LOSE ?