Being conscious and consistent with patience translates to successful investing

The lessons learnt from history can help individuals adapt their financial plans to changing circumstances. Each financial decision, whether small or significant, contributes to the larger tapestry of one's financial journey, shaping future outcomes and opportunities

“Koee Baat Aisee Nahin, Jo Ab Tak Ho Na Kahee Gayee;

Kaam Ki Ye Tabhi Se Hai, Jis Din Khud Samajh

Translation: No theory is new, no path is untried. It is useful from the day it is realised.

The referred couplet acknowledges the continuity and repetitive nature of human ingenuity and experiences covering the entire gamut of topics. This is also true of investment concepts and experiences, which are elaborately published and widely circulated. Therefore, these are easily accessible and academically convincing too.

But are they really useful? There is lesser probability that these are useful. The secret lies in the quotation of Michael Bentick, “Some lessons have to be experienced before they can be understood.”

Let’s try to understand it through a famous fable:

We all have heard the story of ‘The Tortoise and the Hare’. The hare was swift and confident of victory. However, he took a break and rested too long and missed reaching the finish point, whereas the tortoise with his determination and consistency to reach the goal reached before the hare and won the race. The parallel has given birth to the adage ‘slow and steady wins the race.’

We can pick financial lessons from this story. Achieving financial goals is a race and starting late can deprive us of the benefits of compounding (returns on returns), while taking a long break can delay reaching our financial goals.

On the other hand, consistency with small steps (investing a small amount) can help us reach the goal post.

Returning to the ‘The tortoise and the hare’, now let’s suppose that there is another race between the same tortoise and hare. In all probability, the latter won’t take a break till he reaches the finish line. This ‘understanding by experience’ is what Nivesh Sutra aims at.

Assessing where we are financially and where we want to go is important. We know that goals need to be SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound). Despite the ever-changing landscape of finance, the fundamental principles of financial planning have stood the test of time. Concepts such as budgeting, saving, investing, diversification, rebalancing, risk management, and goal setting form the bedrock of sound financial decision-making. Each of these steps is to be uniquely understood by the individual investor him/herself to be successful.

Again, investment is a continuous journey, so we need to continue to update our knowledge regularly.

In our financial journey, we need to assess where we are and where we want to go and the viable and available options. There can be ups and downs as in any journey, but the key is to keep the eyes on the goal and keep persevering. Consciously investing and being consistent and patient is the key to successful investing.

We all have read but how many of us have really known or understood that ‘compounding’ is the eighth wonder of the world, other than a few who have learnt it by investing patiently for the long -term. It’s rightly said that it’s not about timing the market, but the time spent in the market that makes all the difference.

History is a valuable teacher in the realm of finance, offering insights into past events, market cycles, and human behaviour. By studying historical trends, market crashes, economic recessions, and booms, individuals can gain a deeper understanding of financial risks and opportunities. The lessons learnt from history can help individuals make informed decisions, avoid common pitfalls, and adapt their financial plans to changing circumstances.

Financial planning is a dynamic and ongoing process that evolves with changing life stages, goals, and external factors. By recognizing that no theory is entirely new, and no path is entirely untried, individuals can approach financial planning with a sense of curiosity, openness, and resilience. Given the uniqueness of one’s own need, uniqueness of one’s own understanding, uniqueness of one’s own risk-return appetite, one can have one’s unique investment theory and path. Each financial decision, whether small or significant, contributes to the larger tapestry of one's financial journey, shaping future outcomes and opportunities. Finally, I would conclude by quoting Jason Zweig: “If you don’t know who you are, Wall Street is an expensive place to find out.”

‘Who you are’ is a very comprehensive phrase; it involves knowing your knowledge, your skill, your financial status, your risk-profile, your liquidity status and many more. You can get theoretical knowledge on social media, in financial planning books or through fin-influencers and the likes. But, investing substantially, without practical understanding, may prove to be expensive.

Hence, I would suggest starting with a small corpus to understand and co-relate with theory and go on increasing your stake as your understanding goes deeper.

(The writer is senior Vice-president, SBI Funds Management Ltd; Translation and content by Alice Fernandez Barsey, Manager, SBI Funds Management Limited)