Investing made simple

Be conservative and suspicious when investing, instead of trusting and aggressive

Imagine if we could become rich instantly without making any serious effort — things would be really simple. But it’s just a wish.

All of us know the laws of nature. A mango tree takes 12 years to give delicious mangoes. If it bears the fruits before, these would be sour or rotten or both. Similarly, making money is a time-consuming process. Well, it may not apply to a privileged few. But they are exceptions. For the rest, life is full of drudgery.

Remember, if there was an easy way to make money, everyone would have followed it till it became irrelevant. But people continue to seek the so-called parasmani, which will convert everything into gold conveniently, forgetting that if it were available to all, gold will trade below iron or steel or copper.

There is a very old Gujarati saying: ‘Thugs will never go out of business where greedy people live’. And over time, it has been demonstrated repeatedly. Yet, we refuse to learn.

In the early 90’s, the Indian equity market rallied hugely on back of excessive and, sometimes ill-gotten wealth. It created a huge bubble. Eventually, investors were hurt badly. Few people remember Lan Esenda Steel, which raised huge money without being listed ever, or How Mazda Leasing, Karnataka Ball Bearing, traded at astronomical valuations in those days.

In the pre-CCI era, IPO investment was a license to make money due to restrictive pricing. It took hundreds of vanishing companies across sectors to shake that belief.

But even today, you find many people who believe that IPO investment is fine, but equity market is a casino. The mad rush for making instant money in telecom, media and technology sector in late 90s, and early 2000’s not only took the Indian retail investor to heights of absurdity, even professional fund managers suffered with their tech funds.

Greed is not seen only in equity markets, even investors in debt market suffer from this. Plantation companies, which probably existed on paper, raised large sums with promises of high returns. There are examples galore of such fraudulent methods of fund-raising, which investors have fallen prey to over the years.

It is not lack of awareness about greed, but resisting it is difficult. In Mahabharata, Lord Krishna goes to Visit King Duryodhana a day before the epic battle was about to begin. Krishna implores Duryodhana to be on the side of dharma or righteousness and give up just five villages to prevent loss of so many lives. Duryodhana’s response: “Janami Dharmam, Nachme Pravruti. Janami Adharmam, Nachme Nivruti” (I know what dharma is, but am unable to follow it. I know what adharma is, yet unable to leave it).

Most of us are in a similar situation. Our greed does not allow us to follow the right and doesn’t stop us from doing what is wrong. Knowledge and discipline are the best ways to control greed. Follow the following principals to gain knowledge, build discipline and control greed.

For one, there is no short cut to making money. If anyone has that magic wand, let that person be happy. You are better-off without it.

Two, be conservative and suspicious when investing, instead of trusting and aggressive.

Three, ask questions till you are sure about an investment. Be ready to lose a money-making opportunity rather than betting on luck.

Always remember these Gujarati sayings: Utavale Aamba na pake (Mangoes don’t grow in haste); 
Jya Lobhiya hoi tya Dhutara bhukhe na mare (Thugs don’t go out of business where greedy people live); 
Bund, Bund thi Sarovar bharai (Many drops of water make a lake).

And life could be simpler...

The writer is president, Axis Bank. The views expressed are his own