book

Learnings for

Investors

from Sant Kabir and Rahim

VINAYAK SAPRE



Learnings for

Investors

from Sant Kabir and Rahim



content

1. Don't follow the herd 2
6
2. Fly-by-night experts may be loud but
heed the voice of reason 8
12
3. Be disciplined and consistent
16
4. Seek an Advisor who Recognizes 20
Investments that are Valuable 22
24
5. Know your risk appetite 28
32
6. Have patience
34
7. Plan for your retirement
38
8. Have faith in your advisor
42
9. On choosing the right advisor

10. Your Advisor: Your sounding board,
friend philosopher and guide

11. On the need for Contingency
Planning

12. Observe carefully; sometimes no
action is the best action

13 To continue living like a king start
planning early

14 Attaining nancial freedom enables you 44
to pursue your passions and live
a meaningful life

15 Don't Procrastinate 48

16 You can Soar in the Company 52
of an Eagle

17 Seek Constructive Criticism from 56
your Advisor

18 Looks can be deceptive 64

19 Don't get attached to an investment 68
instrument

20 Maintain mutual respect and alignment 72
of thought with your advisor

21 Choose an advisor who stays with 76
you during bad times

22 Don't believe in baseless predictions 78

23 The Goal is All-important 82

24 Nothing is permanent 84

25 On wealth preservation 86

26 Learn from mistakes and move on 88

27 With numerous choices focus 90
becomes more crucial

28 Time can change Fortunes 94

29 On self-sufciency 98

30 Emotions cause Damage 100

31 Do your homework thoroughly before 102
you invest your hard earned money

32 Heed your advisor's advice 104

33 Don't be penny-wise pound-foolish 106

34 Take timely action 108

35 Need for dynamic thinking 110

36 Honest advisors tell you the hard truth 114

37 Understanding the cycle of emotions 118

38 Making effort is the surest way 122
to reap gain

39 Identify your goals and needs 124

40 Live well 126

chapter :01

Don't follow the herd

मूढ़ मड़ु ाये ह र िमल,े हर कोई लओे मुड़ाये l
बार बार के मूढ़ से भेड़ ना बकै ुं ठ जाये ll

य द बाल िनकालने से ही हरी ा होने होते तो भेड़ को तो
मो ा हो जाए और वो बकै ंु ठ चली जाए पर तु ऐसा नह
होता. भेड़ चाल चलने से हरी नह िमलत.े

If by shaving your head you could nd God, then
everyone should shave their heads. And by that
logic, sheep would be the rst to attain salvation.

य द सर मडु ाने से भगवान िमल जाते ह , तो हर कसी को सर
मड़ु ा लेना चािहए, ले कन ऐसा होता नह है , यंू क भेड़ के बाल
हर वष िनकालने से भी उसको मो ा नह होता. उसी कार
िनवेश करते समय भड़े चाल म नह चलना चािहये बि क अपने
िनवशे के उ े य को यान म रखकर िनवेश करना चािहए.

LEARNINGS FOR INVESTORS FROM SANT KABIR AND RAHIM

Herd Mentality

Generally, whilst taking any investment decision, people
tend to follow the herd. Kabir explains that if by shaving
one's head one could attain moksha, then the sheep
would be the most liberated living creatures; but it
doesn't happen. Similarly, before taking decisions on
investments, one must consider one's own need, risk
appetite, goals, liquidity, etc. Following the herd is not a
good idea.

Investors across the globe are driven by emotions of
greed and fear. In a euphoric market, there is a big
concern - “the Fear of missing out” and people start
investing as if there is no tomorrow. The Indian markets
experienced such periods in 1992, during the Harshad
Mehta bull-run; in 1999-2000 in the form of the dot com
bubble and in 2007, it was the infrastructure boom.
Typically, retail investors enter the market at the peak or
near the peak and needless to say, in following the herd,
eventually end up burning their hands.

In January 2008, when the SENSEX touched an all-time
peak, money started pouring into the market. There was
a rush to put money in Reliance Power's IPO and in the
Reliance Natural Resources Fund. There was also a
popular stock called RNRL. I remember a banking
relationship manager once asked me if our fund's
portfolio included RNRL. When I asked her what the

06

DON’T FOLLOW THE HERD

company did, she replied, “I don't know but my clients
want to invest in a fund which has RNRL in its portfolio.
The fate of the above mentioned three perceived “money
multipliers” is known to everyone.

This behavior is not restricted to equity market. In India,
during the 90s, many people fell victim to tall promises of
xed income products, namely Corporate Fixed
Deposits, Plantations and Time Sharing companies.
People were queueing up to put their money in these
companies; they were buying into plantation schemes
without even checking whether the company they were
investing in had a plot of land on which it could grow
anything! Even today, there are many chit fund
companies that are making money on people's greed.

In behavioural nance, this kind of behavior is called
'social proof'. People seek 'social proof'; when they see
that a number of others around them are undertaking the
same activity as they are, it gives them condence that
their step is correct.

As Rolf Dobelli says in his book 'The Art of Thinking
Clearly: Better Thinking, Better Decisions', if 50 million
people say something foolish, it is still foolish.

Therefore, instead of following the herd, one needs to do
one's homework before jumping into the market directly.
Also, it is important to know one's risk appetite by

07

LEARNINGS FOR INVESTORS FROM SANT KABIR AND RAHIM

studying one's risk prole and most importantly, one
should do a proper asset allocation and shouldn't be
bothered by the noise in the market. Though it is easier
said than done, it is important that investors should
control their emotions and follow a rational approach
when investing.

If there're 10,000 people looking at the stocks and
trying to pick winners, one in 10,000 is going to
score, and that's all that's going on.
- Merton Miller

08