- November 27, 2014
- Posted by: IAIP
- Category:Advocacy, BLOG, ExPress, Mumbai
Contributed by: Thomas Collimore, CFA, Director, Investor Education, CFA Institute, William Ortel, Frances Melville, and Kishor Bagri, CFA, Director, IAIP
Can you remember the last time you stayed up late watching a movie when you should have been asleep? You weren’t wasting your time. In fact, you may have gained some insights into managing your portfolio. In case you missed them, here are 10 kernels of investment wisdom from Bollywood classics.
- “People say that when beautiful girls lie they look even more beautiful.”
“Log kehte hain khoobsurat ladkiyan jab jhooth bolti hain, toh aur bhi khoobsurat lagti hain”.
“लोग कहते हैं खूबसूरत लड़किया जब झूठ बोलती हैं तो और भी खूबसूरत लगती हे!”
— Salman Khan as “Prem” in Hum Aapke Hain Kaun (1994)
An air of mystery might make an acquaintance more interesting, but with investing you should seek clarity. Make sure you understand what you’re investing in. Don’t be lured by promises of unusually high returns; they generally come with unusually high levels of risk. One of the first large hedge funds to default during the financial crisis was labeled “high-grade structured credit.” It’s important to review investment materials carefully and educate yourself about the historical performance of various asset classes. And don’t be afraid to draw on the experience and insights of your adviser.
- “Thorns do not live under the fear of withering.”
“Phool toh murjha jaate hain, lekin kaante daman thham lete hain”.
“फूल तो मुरझा जाते हैं, लेकिन काँटे दामन थाम लेते हैं!”
—Madhubala as “Anarkali” in Mughal-e-Azam (1960)
Create a balanced portfolio. The flower is the most beautiful part of a rose, but also the most delicate and ephemeral. The thorns not only last year after year, but they also protect the flower. Add some “thorns” to your portfolio to gain protection from volatility. Bonds and cash equivalents may not promise the high returns of equities, but they may reduce market volatility.
- “Every time I am given future date for hearings but not justice”
“Taareekh pe taareekh milti rahi hain lekin insaaf nahin milta. Milte hain to sirf taareekh”.
“तारिक़ पे तारिक़ मिलती रही हैं लेकिन इंसाफ़ नहीं मिलता. मिलते हैं तो सिर्फ़ तारिक़!”
– Sunny Deol as advocate Govind in Damini (1993)
Why are you not getting expected returns. Behavioral finance research has shown that many investors have a tendency to purchase securities when they are dearest and sell when they are cheapest. Avoid making purchases while you are euphoric or depressed, and remain focused on long-term goals rather than short term market movements.
- “Relationship wise I am your father and the Emperor”
“Rishte mein to hum tumhare baap lagte hain, naam hai Shahenshah”
“रिश्ते में तो हम तुम्हारे बाप लगते हैं, नाम हैं शाहेंशा!”
—Amitabh Bachchan in and as Shahenshah (1988)
Talk candidly to your children about finances. Teaching financial discipline is part of being a good parent. Even if your children are grown, keep a constructive dialogue open about finances and investment planning.
- “There are only two ways to live life: Tolerate things the way they are. Or, take responsibility to change them.”
“Zindagi jeene ke do hi tarike hote hain … ek jo ho raha hain hone do, bardasht karte jao … ya phir zimmedari uthao usey badalneki”
“ज़िंदगी जीने के दो ही तरीके हैं…एक जो हो रहा हैं होने दे, बर्दाश करते जाओ…या फिर ज़िम्मेद्दरी उठाओ उसे बदलनेकी!”
—Aamir Khan as ‘DJ’ in Rang De Basanti (2006)
Make a plan for your investments. If you invest without a detailed plan, you may find yourself following a haphazard course. You may also fail to benefit from the self-examination that setting out a detailed plan can offer. Trusted advisors might offer suggestions you haven’t considered.
- “Half of you go this side, another half this side and the remaining ones follow me”.
“Adhe idhar jao, adhe udhar jao, baaki mere hamare saath aao”
“आधे इधर जाओ, आधे उधर जाओ, बाकी हमारे साथ आओ!”
– Asrani as Jailor in Sholay (1975)
Watch for evasive answers and double-talk. Investments can be complicated and are described with a specialized vocabulary. Don’t be afraid to ask clarifying questions, and don’t be satisfied with confusing answers. There is no downside to understanding too much, but plenty of downside in failing to understand. Educational resources (and complaint forms) are available online from the Securities and Exchange Board of India (SEBI) at sebi.gov.in. Additional educational information can be found at trustcfa.org.
- “If there is no happy ending it means that the film is not done yet.”
“Lekin agar End mein sab kuch theek na ho to woh the End nahi hain dosto… Picture abhi baaki hai mere dost”
“लेकिन अगर एंड में सब कुछ ठीक ना हो तो वो द एंड नही हैं दोस्तो…पिक्चर अभी बाकी हैं मेरे दोस्त!”
— Shahrukh Khan as “Om Kapoor” in Om Shanti Om (2007)
Unlike movie endings, investments can be unpredictable. Investment returns are not guaranteed to be positive in any given five or ten year time window. Thoughtfully evaluate your needs and your time horizon with an eye towards your future goals. Do you need to fund a retirement? Pay for school? Buy a house? Each goal suggests different investment allocations. Stay positive, but plan cautiously with your advisor to make sure positivity is warranted.
- “That day we learned, when your friend fails, you feel bad. But when he tops, you feel even worse”
“Uss din hamein pata chala ki Dost fail ho jaye toh dukh hota hai … lekin dost first aa jaye toh zyada dukh hota hai”
“उस दिन हमें पता चला की दोस्त फेल हो जाए तो दुख होता हैं…लेकिन दोस्त फर्स्ट आ जाए तो ज़्यादा दुख होता हैं!”
— Madhavan as Farhan Qureshi in 3 Idiots (2009)
Don’t evaluate your portfolio based on how others are doing. Your risk profile and future goals are unique, so they require a unique portfolio. If you’re a risk averse investor, judging yourself against those who take huge risks is a recipe for disappointment. Stay consistent and evaluate your investments based on a method you design carefully with your advisor.
- “Don’t take stress, give it to others”
“Tension lene ka nahin, sirf dene ka”
“टेन्षन लेने का नहीं, सिर्फ़ देने का!”
– Sanjay Dutt as Munna Bhai in Munna Bhai MBBS (2003)
You’re the boss. Don’t tolerate advisors who won’t work with you in the manner you desire, and feel at liberty to question them. A significant part of their job is to answer your questions and help you feel secure.
- “One should love you as you are. If someone loves you by changing you then it is not love it is a trade”.
“Koi pyaar kare toh tumse kare, tum jaise ho waise kare. Koi tumko badal kar pyaar kare toh woh pyaar nahin, sauda hain”
“कोई प्यार करे तो तुमसे करे, तुम जैसे हो वैसे करे. कोई तुमको बदल कर प्यार करे तो वो प्यार नहीं सौदा हैं!”
– Rishi Kapoor as Raj Nath in Bobby (1973)
Don’t try to change yourself. You are unlikely to succeed by pursuing an investment strategy that differs substantially in risk from your ideal. You may reap higher returns but lose many restful nights of sleep. Work hard at developing an approach that meets your goals and also lets you sleep soundly (despite the advantages of staying up late to absorb Bollywood investment tips).
– TC, WO, FM, KB