The other day I was watching a typical show on a business channel on investment advice.
Life is full of ironies. We find on TV Channels that it is mostly twenty somethings fresh from college armed with a degree on finance management, who offer a wide range of advice to people of all ages , who have faced all kinds of financial calamities and have been battered by life. I wonder why most of them have to be girls; at the risk of sounding misogynistic, I feel , the riskiest undertaking, these advisers would have faced on investments and risk management, would have been exposure to online booking of air tickets and hotel rooms. I don’t think they would be under pressure to support a family or even support themselves by holding on to a job.
So, they generally stick to laid down formulae for risk taking. One formula goes like this ; 110 minus your age in years should give the percentage of investment you have in equities.
Coming to the TV Show, what caught my attention was that the younger investors were easily alarmed by any downswing in the market and consequent erosion of wealth. They have the youth and energy to earn more money and recoup losses and also they enjoy good health to hope to see their investments grow over the next 25 -30 years. But then human behaviour is strange.
On the contrary, there were a whole lot of retirees who were not only prepared to take risk, but were also ready for the long haul, if the market forces turned adverse.
A conversation went on like this :-
Investor : I have investments in 10 MFs (lists all the funds) . I am a long term investor ……
TV Anchor : Your fund selection is excellent for long term investment. What is your age now and how much do you earn per annum?
Investor : Just retired about a couple of years back. I am about 63.
TV Anchor : At your age, it is advisable to reduce investment in equities or equity based MFs….. blah ..blahh
Investor: I can wait. No problems. The market will improve . BY 10-12 years I am sure the returns will be good.
From the facial expressions and the body language, unspoken words from the Anchor were loud and clear .
– No doubt , the fund will stabilize in ten years time, but will you be stable then ?
– Wonder what are you going to do with the bumper returns at 75 !
Obviously she could not ask these questions explicitly. So the conversation went back and forth; she harping on matching his risk profile with his age and he assuring her that he was okay to wait for ever.
Old age not only gives you lots of time in the present, but also gives you the patience to wait for a future reward.
The youth neither has time in the present nor the patience to wait for a future reward.
Viva Old-age !