Dealing with long-term investments in India

Probably the most overused or abused word in investing is long-term. Many investors actually don’t understand when they say or listen to it while the rest perhaps don’t even care. There’re of course, a lot of variations of what forms a long-term for investors and advisors alike.

The logical reason being difficulty to project such long periods of say 25-30 years into the future and guestimate what cash-flow requirements would crop up. At times, needs like children education with 15 to 18 year horizon gets under the skin of the investors partly because they’d experienced it or could able to relate. But the real pain is in the retirement planning where the tenures and quantum are long and high respectively.

And yes, the other common perception of looking for the long term means sacrificing or thoughtlessness for the shorter period, meaning ignoring the short-term. No, that’s not what I meant but avoiding the impulse to act in the short-term could be critical.
True, it’s not easy to sit on the fence and remain passive to the developments when there’s an avalanche or a stampede happening in the market.

It’s also as important to manoeuvre in the proximate as to gaze at the distance. The success lies in bringing balance to your psyche especially in these testing times. In the recent past, whoever has invested in the bitcoin say even at $8,000 a piece could’ve tested their resolve as it flirts $17,000 each particularly when the milestones were reached at an alarming pace. So, what should be their action or should there be an action at all?

These questions storm up our minds because of not just for our lack of comprehension but the lack of tenacity to hold on to our goals or more about not having goals altogether. Then how exactly one should approach investing, for the long-term. The answer lies in being simplifying things or keeping things simple.

Vision: One should be clear about the ‘why’ of the investment before the ‘what and where’ of the investments. Once you are clear with the motives, the infrastructure would automatically fall in place. It’s analogous to a road trip.

Till you know where to go, every road will lead you somewhere. Be aware of what you want and only then could some help be offered or taken. This also helps in arriving at the timelines you want to stick to. Having a vision or philosophy in life helps you come with one for the investments. Evolve.

Diversification: This is your personal moat that protects you against the market vagaries. This mutually bolsters your confidence and portfolio while reducing heartburns. The recovery from a trough is quick while never reaching an abyss could be a very big bonus. The generations-old wisdom of distributing eggs in various baskets holds good, forever.

Risk: Unlike the popular assumption, it’s not what a particular avenue is associated with but it’s what you can endure. This defines your urge to act to a particular situation that could result into a loss.

Please understand sometimes the biggest risk is not taking risk at all. Extrapolating an event with simulations would completely not equal the experience of going through such an event. Perceptions could lie and risk assessment of self is one such thing, fine-tune it. Do remember, returns are an outcome of risk management.

Discipline: We know habits make or break lives, same in the case of investing. The more persistent and diligent you are, the better are the results and returns. A consistent strategy or vision would eventually build the required discipline into your system taking up the goals and hitting the milestones as you progress.

Time: In investing it’s not the valour you display that brings rich dividends but the patience you exhibit. Investing for a kid is liking bringing up the kid itself. Hence remain calm, exhibit tolerance, give time for yourself too, learn and most importantly enjoy the whole journey.So, in the end - how long is long? It’s as long as your vow.

(The author is Co-Founder, Wealocity, a wealth management firm and could be reached at knk@wealocity.com)