Don’t be afraid to get rich

November 26, 2014 . Vidya Bala


It didn’t need much deliberation for me to choose the title of this article; straight from the gut, if you’d like to call it.

Before I proceed, let’s get one thing clear. We are not talking of getting rich through a lottery or inheriting huge wealth here. We are talking of:

• Simple investing practices that delay gratification so that you and your family may enjoy it to the fullest later
• Having your financial goals fulfilled comfortably
• Retiring in comfort, and
• Taking dream vacations without having to count every penny

When we choose conservative investment options, become apprehensive about investing more in a superior yielding asset class (a.k.a equities), dread losing money, and fear far too much about ending up poor, we are simply denying ourselves a chance to become rich.

Here are some of the common fears we have about investing in a seemingly ‘risky’ asset class such as equity, along with reasons on why your fears may not be justified.

I am afraid I’ll lose money in the stock market

Yes, you should be afraid you’ll lose money and you probably will. Well, ask yourself this: there are so many mishaps that happen out there on the roads, up in the air, and under water. Does that stop us from going out or travelling? It’s all about doing what you can to travel safely. And very likely, you do just that and are alive!

Let’s face it: markets do fall and equally frequently or more, they do go up. And when they go up, they usually erase the falls without a trace. What seemed like a fall in 2008, when viewed from a longer period, say from 1994-2014, would seem like a blip. That’s precisely the impact equities have on your wealth.

In the short term, a fall in equities could dent your portfolio quite a bit. But in the long term, they are just a tiny blip in your sharp upward–moving wealth curve.

I am afraid equity markets are at a high

Yes, markets do get to highs and fall. But never forget, they have only gone to newer highs from thereon.Unless you were in Japan for over a decade, it is unlikely that you would have seen any market, especially an emerging market such as India, falling, never to recover.

In fact, by making that statement, you are actually trying to time the market. Now that I call scary!

Remember, when you start planning for your kid’s education or your goal, your time has already started ticking. You have no choice but to ACT, rather than ponder over when to enter.

I’ll end with the most common statement used by investors.

I don’t like to take risks

Really? Is that true? If you will take the risk of getting negative returns (yes, that is what you got from your deposits in the last few years, post 30 per cent tax), you couldn’t possibly be afraid of taking risks!

By not exposing yourself to the risks (and rewards) of equities, you risk not meeting:
• Your cost of living
• Your kid’s education, and
• Your retirement expenses

Your recurring deposits are not going to help you build your children’s education kitty; your Public Provident Fund or Employees’ Provident Fund would simply not be sufficient to meet your post retirement expenses, leave alone your medical bills. Of course, forget about any surplus for those post retirement vacations you dreamt of.

Think about it folks. The risk of equities is far higher for the promoters of the companies where you invest, and so, they enter untested waters in an attempt to hit it really rich.

Whether it is equities or mutual funds, all you are going to do is restrict your risk significantly by entering into imminent success stories. And unlike the promoters, you have such an easy choice of exiting the sub-optimal options and moving your money where the potential lies. Even this decision is made easy, when you have a fund manager managing your money, through the portfolio of stocks in your mutual fund.

The biggest risk, folks, is therefore the RISK OF NOT OWNING EQUITIES!

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