Many equity investors would have felt like Preity Zinta - on the brink of fulfilling their goals but yet being so far away
07-Jun-2014 •Saurin Parikh
I expected KXIP to win the IPL final last Sunday. I think they just got unlucky with some poor bowling decisions. It was a nice thing to have the top 2 teams from the league stages in the final, but given the way KXIP had performed throughout the tournament, they deserved to win a tad bit more than KKR. It was a fairytale that didn't have a fairytale ending.
I felt particularly bad for Preity Zinta, though. She'd been present at all of her team's matches, cheering and motivating them. To see her all choked up at the end of the final was just heartbreaking. She had her goal within arm's reach, but it was yet so far away. It's the way any team on the losing side of a major final would feel like. The dedicated efforts, the time and energy put in through the league stages, amounting to a runner's up trophy can easily leave one disappointed and dejected. No matter how much you enjoy the journey, it's not worth it if you don't reach your destination in the end.
I have felt like this too. No, I wasn't on the losing side of any major sporting final. In fact, not even a minor sporting final. But I've felt like this as an equity fund investor.
I say this because I had dedicatedly invested to achieve an investment goal, but was left dejected right at the end. I had the investment goal in the palm of my hand, but it slipped away at the very last moment. This happened right in the beginning of 2008 when the markets crashed unexpectedly and plunged my investments into deep losses. The only thing it left me with was an invaluable lesson. I committed a mistake at that point in time, which I have learned the hard way to never commit again.
The mistake was - not disinvesting regularly. I knew the importance of investing regularly and systematically. I had been doing that for 2-3 years, with the objective of building a corpus to pay for the down payment of a house. I intended to buy the house in the first quarter of 2008; goes without saying that I couldn't. Why? Because even though I had invested regularly, I didn't disinvest regularly as I neared my goal. The markets were at an all-time high, I was making huge profits and I wanted more. This greed made me lose sight of my goal. And like many other investors, January 2008 left me in shock.
Of course, no one could have predicted such a downfall in the stock markets. But, that is exactly my point. You can't time the markets, neither its ups nor its downs. You should be investing for a goal or objective, and nothing else.
What I should have ideally done - what every investor should ideally do - is start systematically pulling money out of my equity funds as I neared my goal. Once you're a few months away from your objective, start booking profits from your equity funds and move the money to your bank account or an appropriate debt fund. Don't disinvest in lump sum, calculate exactly how much you'll require and pull the money out in portions leading up to the goal. This way, you won't be left stranded, like I was, in the unfortunate event of a market crash just before you need the money.
In this regard, sportsmen are not as lucky as investors because they don't have the option to disinvest. But then, they're dependent on their own skills and efforts, while investors are dependent on a large number of external factors to help them achieve their goals. We can't control these factors, but we can control our own actions - investing regularly and disinvesting just as regularly. Trust me, you don't want to be left high and dry like I was. Preity Zinta at least got the runner's up trophy; all I got was a lesson.