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Last Updated : Feb 07, 2020 01:29 PM IST | Source: felixcossolo.com

Diversifying one's portfolio across countries key to minimising risk, says DSP MF's Anil Ghelani

Investing savings only in the home country may result in investors undermining their risk.

Moneycontrol Contributor

Anil Ghelani

Amithabh Bachchan’s popular game-show ‘Kaun Banega Crorepati’ (KBC) recently concluded its 11th season. The show provides a lifetime opportunity to one out of a million households to earn money to fulfil their life-long goal and provide for their needs.

365体育官网The show is inspiring in many ways. The contestants’ struggle and hardship to reach the elite ‘hot-seat’ represents perseverance and endurance. When the contestants are on the spotlight, they exposed to difficult questions and forced to make quick decisions, which tests their knowledge, skills and composure. Lastly, for their efforts they are rewarded handsomely with money.

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365体育官网We mustn’t forget our host, Mr. Amitabh Bachchan, who has had an astounding career as a Bollywood actor and has been hosting the show for the most part since its inception. One of the most hard-working and humble men in Indian cinema, he comforts the nervous contestants, empathises with their grief and gives them confidence when needed. He is one of the very few actors to have not only survived but also be successful in the industry for such a prolonged period.

The lessons from the inspirational story of KBC have an uncanny similarity with Alan Greenspan’s investment philosophy. Sound’s too far-fetched? I’ll explain how.

Alan Greenspan was the Fed chairman from 1987 to 2006, the second longest serving chairman in the history of the United States. He is an economist by profession and often known as the ‘inflation hawk’ for his focus on price control and for his trading strategy called the ‘Greenspan put’ which minimized risk and rewarded safe returns to investors. During his time as Fed chairman, upon observing markets closely, he had devised some unique investment philosophies.

First being the ‘sleeping point’ which states that investors holding stocks for long periods and grinding their teeth through short term fluctuations in stock markets are bound to do better. This also places emphasis on investing in a portfolio of stocks for the long term and not undertaking short term trading to try and time the market.

365体育官网Second, being that investors should keep ‘Irrational Exuberance’ in check. When it comes to investing, one mustn’t rely on emotions. The numbers must support and back up the rationale behind the investment. When it comes to investing, one must do their due diligence, just winging it or playing it by ear won’t yield desirable results.

Lastly, investors should beware of ‘home biases’ while investing. Investing savings only in the home country may result in investors undermining their risk. Diversifying a portfolio across countries is the key to minimize risk. To get expertise in foreign and domestic assets, SEBI recommends consultation and investments through vehicles like mutual funds, ETFs, among others.

365体育官网Upon looking closely, we can see the familiarity between the two cases emerge. The ‘Sleeping point’ philosophy is represented by the perseverance and endurance the contestants undertake to reach the ‘hot-seat’. The ‘Irrational Exuberances’ philosophy represents the composure and calmness that the contestants must maintain while making their decisions, coupled with the importance of knowledge of the subject matter.

365体育官网The ‘home biases’ philosophy represents the importance of expert opinion and the use of life-lines (these are a part of the game-show where contestants can phone a friend, take an audience poll etc if they don’t know the answer) to mitigate risk and consult an expert in times of need.

With the Indian Economy expected to grow at 5 percent in FY20, the above philosophies are the need of the hour. We need to keep investing, have faith in the system and not get bogged down by a few failures.

Keeping a long-term horizon in mind, sensible and smart choices would lead us to our goal. Ultimately, the rewards are mouth-watering, just as it is for the contestants of KBC. With must-have the famous motto in mind: ‘Ade raho’, i.e. keeping moving and don’t stop until you reach your goal.

 Author is Head - Passive Investments and Products, DSP Mutual Fund
First Published on Feb 7, 2020 01:28 pm
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