Investment ideas that have stood the test of time

[ajay7a]

Lately there have been lots of talks on inflation being around the 11-12% mark. Personally I am of the view that inflation in India is not just around 11-12%, but much higher. Figures can be manipulated, and they always are. Just look at the prices of things we use in our daily lives. Some things they have gone up by more than 40% in a matter of few months.

Inflation, political problems, energy crisis, credit crunch, higher interest rates, sub-prime problem are all going to affect the markets. Investors are usually extremely jumpy and do not take rational decisions. Simply on hearing all this there is a flight of capital which has been bringing the markets down. Markets can go down further - I don’t know if they will or they won’t. Most retail investors who do not believe in value and do not bother too much about fundamentals are constantly grumbling and cursing everything now. Many of them have gone bankrupt due to taking leverage in the form of trading in futures. I understand their problem, however I wish that all of them learn from their mistakes and try to use this time as an opportunity to learn more. I too have made such mistakes in the past, but luckily I have learnt from them.

For value investors the markets going down is a great opportunity to buy, however the sad part is that most retail investors do not think this way and now even if they do, they might not have sufficient funds to benefit from this. Many will panic and sell and again after a few years will curse their luck for selling so low. My advice to them would be that use this opportunity as a time to start afresh. Every day is a new day and every day gives us the chance to start a new life. Once Edison had his whole lab burnt. Lots of his work and research was there in the lab, but he still was very happy. People were surprised and wondered why is he smiling even though his lab is burnt. He told them that all his mistakes have been burnt and he has the opportunity to start afresh. If you have made mistakes, do not worry and use this time to learn.

Less than around 4% of India’s savings goes into the stock markets. As more and more people are educated about investing, this figure is bound to rise. As this figures rises, unethical operators and dirty money belonging to politicians will be less likely to control the stock markets. As more and more people have a stake in our country’s growth, politicians will be more responsible to make sure that their decisions are beneficial to investors and the capital markets. This correction has been one of the best things that could have happened for any value investor. It is giving us a chance to buy assets into an economy which still has a long way to go.

I am a strong believer in the theory of Karma. If we work hard today, learn more and invest in knowledge we will be rewarded. I was at the BSE building the other day and a good friend there who has been a part of the markets as well as the BSE for several decades very beautifully told me something from the Gita, which he has used in the markets. He told me that the Gita tells us to do our duty and not worry about the fruits and rewards. If we do our duty we will get the fruits either sooner or later. The same applies to the markets. We need to do our work and not worry about the returns in the short term. If a business is good, it shall be discovered by the masses sooner or later. These ideas are not very popular, but these are the very ideas which have stood the test of time. This simple idea runs into every area of our life. Let us all sow seeds of good in every area of our life.

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