We don’t deserve equities

Every investor has this energetic zeal with which he starts his investments. He plans for his goals, say
3,5 or even 15 years away. He visits a financial planner, understands his risk appetite , cash flows and
then he is set to begin investing.

He is well aware of the asset class he has selected- EQUITIES, since no other route except gambling
‘though we don’t support or promote it’ would have helped him achieve his goals.

Lets name this guy Vikas. Vikas has his group of friends who are investors themselves- Tarunkumar ,
Jagatguru, Jagrutiji & Sarkar Singh. All of these have been investing now for a varied tenure from 1
year to 7 years. These friends have various takes on the growth story of our country. So when Vikas
was a bit confused what should he be doing with his money, like keep it in Savings account itself, or
start a recurring account, or should he look for some other asset class, his friends told him about The
India Growth Story and the right asset class for him i.e EQUITIES.

He was not convinced in the beginning because he knew that Equities are risky. So his friends
preached him the following.

1. Mr. Tarunkumar told Vikas ,”India has great demographic advantage where 65 % of the
population is between the age group of 25-35 years.”
2. Mr. Sarkar Singh said, “ The government in implementing revolutionary policies, and once
proper infrastructure is set , results will be seen.”
3. Mr. Jagatguru told Vikas, “The World’s outlook about India is great, and is optimistic about
India’s structurd growth story.”
4. Mrs. Jagrutiji emphasised ,”We are going to have a phenomenal growth in the coming years
.Global investors are eyeing for India.”

Vikas was convinced, that equities can help him create wealth with inflation beating returns. His
friends advised him to him consult a financial advisor for his investments so had they themselves.
With all this conviction, Vikas started with his SIP’s , diverted his excess FD’s and Savings surpluses to
his mutual fund Portfolio and was happy to start investing.

Vikas’ journey begins in a bullish year, everything seems so nice and rosy, investments are going up,
returns are staggering, He thanks his advisor and his friends for suggesting the best funds. His know
everything friends told him various reasons for his returns and how everything right from the
domestic currencies to crude oil to global economies are in our favour, businesses are prospering
and what not.

Unfortunately, such booms don’t last much and the very next year Vikas sees his investments in the
negative territory suffering from a steep correction in a few months. This same group of friends
happen to meet again the same frineds who were very positive about economy, business,
government, trade had been telling Vikas how are now visiting their advisor’s office’s for redeeming
his investments and stopping their SIP’s which he had started for his child’s graduation after 18 Years
and his retirement after 22 years.

This is where I say,” We don’t deserve equities”.

One correction and few % negative portfolio and the whole positivity and optimism about our
country’s potential, demographics, business opportunities and their goals and dreams and what not
just fails at the cost of mere panic sell off.
Corrections have happened in the past and they will in future. Is our conviction about our country
and governments so fragile, to get shattered by some negative new flow?

We talk and preach others about long term investing, but when we face losses, all that preaching
goes for toss.

Equity investments by nature are volatile and that is what the premium they offer against other
asset classes. If equities were risk free, why would one expect returns in excess of the rates offered
on GOI bonds.

May a time come that there is no need for such articles to be written. Saying again, we don’t deserve
equities.