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Smart Investing: Go Fearless When the Chips are Down

Jan 23, 2019 8:41 AM 5 min read

Felix Baumgartner was sixteen when he jumped off a building for the first time. That’s when he realized it was what he really wanted to do; jump off bridges, parachutes, mountains, and pillars. But he had no idea what his future had in store for him. He had never imagined that his luck would take him 39 km above East Mexico and make him jump at a speed that would exceed the speed of sound.


In order to make that happen, an 87-page proposal was presented to RedBull in 2007. Post its acceptance, for the next 5 years, RedBull trained him for the death-defying jump. A jump that was going to break the sound barrier at a speed of 1300 km/h!


The doomsday arrived. On 14th October 2012, in a full-pressurized suit, Baumgartner was packed in a capsule. With the help of a Helium balloon, he was ascended to an altitude of 128K feet (That's 99K feet higher than the top of Mount Everest). 


Be A Smart Investor: Go Fearless While Investing


When he finally opened the door of his capsule, high in the sky, he was fearless to jump into the low atmospheric zone. Standing under a pale blue-black sky, he was fearless to shatter all the records that had been registered in the history of space jumps. He was at a point where he could measure the entire width of New Mexico between his thumb and index finger. And yet he was fearless to dive in the outer space and descend to Earth at a supersonic speed.


 “I am going home now”, said Felix and jumped from his capsule.


It took him just 10 minutes to break the 8 World Records and the sound barrier altogether. By the time he landed on Earth, his fearlessness had made him the 1st skydiver to move faster than the speed of sound. 


When asked how he felt at the top, he replied: When I drink Red Bull, I go supersonic. I am fearless. I am an Übermensch.


Undeniably, we get richly rewarded once we fight our demons. Fear being one of them.


This is also true for investing. A human brain is not wired to respond positively to a financial loss. Be it losing real money or witnessing paper loss due to downtrends in the financial market. Our pain of loss often exceeds our excitement of gain. Over time, it turns into fear and affects our logical way of thinking. As a consequence, fear of loss makes us miss many golden opportunities that would reward us considerably well in the long-term. Under its blindfold, we often fail to spot lucrative possibilities.


For instance, a crash of 29% induced fear among the stock investors between 10th May – 14th June 2006. This resulted in panic selling and paper losses were converted into real ones.


A Crash of -29%
Source: Moneycontrol


On another different occasion, equity investors lost their control after witnessing a crash of 57%. A huge portion of their wealth was eroded within a few days.


A Crash of -57%
Source: Moneycontrol


Let us see the other side of the story.


You’ll be surprised to know that both the crashes belong to the same chart. Yes. And that too SENSEX! These downtrends scared the investors for a short period of time and then blew away like smoke. But people over-reacted, and their fear cost them dearly. Without giving a second thought to the long-term prospects of our country, they shed off their quality holdings. Consequently, instead of buying what was available cheap, they sold their valuable bets cheap. 


On the contrary, there were a few fearless ones who infused their capital during such troubled times. Post-apocalypse, the market witnessed a V-shaped recovery. Huge tailwinds stepped it. The index touched new peaks. Their capital grew in tandem with a rise in the market. 


Crashes Appear Small Dips in Long Term

Source: Moneycontrol


The point is: Without being fearful, if we enclose our mentality around long-term perspective, these crashes will appear to be just small dips (circled in the chart above). Without being fearful, we can leverage thousands of opportunities to invest that emerge after such instances. Without getting fearful, we can continue investing in the equity markets through SIPs, build our wealth, and plan our future really well.


At RichifyMeClub, I have been consistently writing about investing not in terms of months, not even a few years but over decades. This is because over a period of a decade, the Indian financial market tends to show a positive trend.


For instance:


During 2000-2009, it gave positive returns on 7 different episodes.

During the period 2010-2018, it stayed positive 7 times. 

Almost 75% of the time, the market gave fruitful returns. And it’s only about being fearless 25% of the time. 


Market stays Positive
Source: Moneycontrol


The financial markets have always been volatile, and is likely to remain so. What does the future hold? Nobody really knows. However, the history of volatility shows that the markets recover really well after a downside.


The only thing I can assure you of is that India as an economy has bright prospects going forward. Invest in its future. Ride these ups-and-downs and stick with a long-term game. After all, during troubled times, the fortunes get transferred from the fearful to the fearless.


Originally Published in RichifyMeClub


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