EspressoLogy

This piece is about the five lessons to keep in mind as an investor. Through stories and teachings from Lord Krishna’s life, we can learn to make smart investment decisions!

It was Janmashtami 2020 just a few days ago, and as the nation celebrated the birth of Lord Krishna, we look at five lessons investors can learn from the wisdom and actions of the master planner and strategist.

The pot of butter is always reachable

Everyone’s favourite story of Lord Krishna is about his penchant for stealing butter. To put the butter out of the young Krishna’s reach, his mother Yashoda and the gopis would keep it in pots that hung high. But Krishna was not one to give up easily. With a little help from his friends, who would form a human pyramid, the young, naughty “thief” would always get to his “lofty” goal.

The parable works superbly as a metaphor for using a systematic investment plan to achieve your financial goals. Think of each friend in the pyramid as one of your installments. Every friend (installment) gets you closer to your goals. Of course, the pyramid will wobble and tumble (just as markets will see periods of volatility), but if you persist, as Krishna did, your SIP friends will get you to the pot of butter.

Greed isn’t good!

In the Bhagvad Gita, Krishna says, “as fire is covered by smoke and a mirror by dust, knowledge is obscured by desire”.

When you are investing or trading, don’t let greed cloud your good judgement.

Many investors enter into speculative trades on penny stocks or take decisions based on “tips” in hope of making a quick buck, only to end up with a loss. Do your due diligence and research and avoid such easy traps. Invest in knowledge before investing in the markets.

Traders who are intimately familiar with the movements of the market frequently make the mistake of not cashing out on time, believing that the momentum will continue to favour them. Sometimes, it doesn’t. Don’t get carried away by greed. Stick to your targets. Use tools like trailing stop-losses to protect your profits.

Be adaptive to change

“As a man sheds old garments in favour of new, so the soul casts off a worn-out body and enters into a new one,” Krishna tells Arjuna, explaining the cycle of life.

As an investor, you must realise that ideas are not permanent. Markets are unpredictable. Good companies may run into a bad patch. Underperformers may suddenly shine. Government policies may change. New business models may be discovered. Technology may disrupt. What you were convinced about 10 years ago, a year ago...may no longer be relevant. Be prepared to acknowledge new information and change your investment strategies to suit the new reality.

A little over two decades ago, Google and Amazon did not exist. Today, they are among the world’s most powerful companies.

Don’t get emotional!

As the forces gather on the battlefield of Kurukshetra, Arjuna is overwhelmed with emotion about waging war against his brothers and teachers and friends. His charioteer, Krishna, shares wisdom and insight on why Arjuna must do battle to achieve his life’s purpose.

Like Arjuna, people sometimes get attached to (and emotional about) their investments – even ones that may be preventing them from achieving their financial goals. This is especially true when you have to cut out an investment you have held for a long time. Your decision to sell a security should be based on how it fits into your overall investment strategy and not because you have an emotional connect with it. Emotion has no place in investments, just as it didn’t in the battlefield of Kurukshetra.

Get a good charioteer!

The battle of Kurukshetra might have ended differently if Krishna didn’t have the reins of Arjuna’s chariot in his hands. It is Krishna’s wisdom, counsel, and deft manoeuvring of the chariot that enable Arjuna to emerge victorious.

To someone who is unfamiliar with investing, the markets may seem overwhelming and complex. Choose a good investment partner, who can guide you through the rough and tumble of the markets with research and knowledge.