Thoughts while investing

Happy Holi

Posted By: Admin

The festival of Holi has special significance to Indians. It is an important festival in the calendar of festivals that we celebrate in India. Let us try and understand the connection between Holi & Investing.

Holi is widely recognized as the festival of colours when each of us apply the different colours to usher the onset of Spring season. No Holi Celebration is complete without the application of colours Red, Blue, Green, yellow and many more. We greet friends and family by applying colour on their face. Just as one cannot imagine holi without different colours. One must also look at different types of investments to make up one’s long term Portfolio. So the portfolio must have elements of Equity, Debt, Real Estate, Gold.. the proportion really depends on your purpose and conviction, but you must have at least a little bit of every asset so that you are not over dependent on one asset. That way if one asset goes through some difficulty you must have other sources that you can continue to deliver returns to you in such times. So the message of Diversification is brought home beautifully by the diversity of colours of Holi.
Holi also signals the end of winter and the onset of spring and summer thereafter, so it is the time most homes esp in North India will change their decors and clothing moving from warm woollens to cool cottons. The North India esp has harsh winters and equally harsh Summers, so this change is essential to survive for the people. Similarly from an investment standpoint, one must at least once every year check and rebalance your portfolio. This is to ensure that If one asset class has had a major jump and another is down, it is important to reset the Asset Allocation as per the investor’s need. This will help the investor gain in the long term. So Rebalancing the portfolio is another important learning from Holi.
In the mythical story of Hiranya Kashpu, the demon king who was given a boon that he could not be killed in night or day, inside or outside, by a man or animal etc.. in spite of all these specific conditions he was killed by Lord Vishnu as Narasimha ( half beast, half man) , at the twilight ( neither day nor night) and in the doorframe ( neither inside nor outside). So however improbable an event may appear, one needs to be prepared for its occurrence. In the investment world these improbable and life changing events are termed Black swan events. while one may never be able to predict these events accurately, one must however be mentally prepared for such possibilities. The prepared mind is less susceptible to panic and therefore is better equipped to protect from the consequences as also to benefit therefrom. The Crash of March 2020 of global stock markets is a grim reminder that stock markets are fickle and can swing as per emerging events that have unknown consequences. Be Mentally prepared for Black swan events in your portfolio construct.

To summarise, the festival of Holi inspires us with the following messages relating to our investing matters :