Recently I visited a bank branch in Mumbai with my 4 year old daughter. As part of their ‘start saving young’ campaign, the branch manager gifted my daughter a piggy bank. Excitedly she started examining the fluorescent orange piggy. She found the slot to put the money in. I offered her a few coins to drop into the piggy but she refused. She didn’t want to put the money in till she figured how to get it out. And this bank had built the piggy such that you could not take the money out. If you wanted the money, you would have to break open the piggy. And it made my daughter very nervous when she found this ‘technicality’ out.
Human instinct is really an amazing thing. All these years as a personal finance writer, I have been writing about the benefits of long term investing. Sandeep Shanbhag, an investment advisor who I work with very closely, calls it ‘the fill it, shut it, forget it’ strategy - you build your portfolio with sound quality equity investments and then don’t touch it for a long long time. Of course you continue to review and monitor but the point is to not get swayed by short term market sentiment.
So when I saw my daughter react to the piggy bank situation, I realized how long term investing was simply against human nature. In my blogs and columns, I have tried to support the argument of long term investing with real life examples, empirical data and the works but yet people get nervous when you ask them to hold their investments for more than 5 years.
Naturally, it takes a lot of will and discipline to overcome this trait, to hold on to investments over a long term, especially when that term has a lot of ups and downs, bull runs and bear phases. Perhaps that is also why it is rewarding and those who manage to overcome this instinctive trait tend to get wealthy.
As for my daughter, she was convinced when I told her she could break the piggy when it got full and use all the money to buy something for herself. She even dropped a few coins in it. Only her next concern was, “Will I get a new piggy?”
Well darling, if the piggy was life and the money in it was for retirement, you surely will get a new piggy!
That’s it for now. Money Happy Returns!
Human instinct is really an amazing thing. All these years as a personal finance writer, I have been writing about the benefits of long term investing. Sandeep Shanbhag, an investment advisor who I work with very closely, calls it ‘the fill it, shut it, forget it’ strategy - you build your portfolio with sound quality equity investments and then don’t touch it for a long long time. Of course you continue to review and monitor but the point is to not get swayed by short term market sentiment.
So when I saw my daughter react to the piggy bank situation, I realized how long term investing was simply against human nature. In my blogs and columns, I have tried to support the argument of long term investing with real life examples, empirical data and the works but yet people get nervous when you ask them to hold their investments for more than 5 years.
Naturally, it takes a lot of will and discipline to overcome this trait, to hold on to investments over a long term, especially when that term has a lot of ups and downs, bull runs and bear phases. Perhaps that is also why it is rewarding and those who manage to overcome this instinctive trait tend to get wealthy.
As for my daughter, she was convinced when I told her she could break the piggy when it got full and use all the money to buy something for herself. She even dropped a few coins in it. Only her next concern was, “Will I get a new piggy?”
Well darling, if the piggy was life and the money in it was for retirement, you surely will get a new piggy!
That’s it for now. Money Happy Returns!
Deepa Venkatraghvan, a chartered accountant, loves to write. She writes on making personal finance and economics simple to understand. You can visit her blog Money Happy Returns.
No comments:
Post a Comment