Something to Learn from my Dad

Amar Pandit , CFA , CFP

In the previous Nano, I had written about the 3 Real Drivers of Performance. I know many people who practice these 3 Real Drivers diligently, but I thought of sharing a bit about My Father’s Approach to investing that I love. Most of this is behavioural and I think you can find some wisdom in his approach.

My father, Prabhakar Pandit worked with Bank of India for 40 years (the only job he held). He was a good saver but never invested in stocks besides some holding in Bank of India. He was never an equity investor as he did not believe in the stock market. When I started the firm in 2005, I asked him “Why do you not invest in the stock market?”  He said “I did not understand what was happening. I had a friend who used to invest regularly. He never gambled but invested in good companies. Somehow, I did not invest.”

I walked my dad through the nuances of investing (nothing technical) but basics of investing, mutual funds, and SIPs. I could see that he got the key points very quickly. When he started to have some monthly surplus, he said that I want to start my SIP and he started with a SIP that he continues till today.

He is 80 now and though he started investing much later, he has the mindset of the best behavioural investors. This is what he does:

  1. Invests a Fixed Amount every month. This is his 10th year of investing through SIPs.
  2. Never Looks at his Portfolio Report. He knows he does not need the money now and knows the value will not change by looking at the portfolio regularly.
  3. Comes to me only when the markets correct sharply or when he hears a lot of noise around. The last time he checked with me was 2008-2009 to invest and then now again in 2020 to invest. He says great time to invest. Having said that, whether the markets are going up and down, he does not bother at all.
  4. He loves to read newspapers (he reads 7 of them daily) but never lets any       headline stress him.
  5. He knows that inflation (and more so Lifestyle Inflation) is a bigger killer and the only way to beat this is by becoming an Owner of Multiple companies. He also understands that there are liquidity and tax advantages that come with investing in mutual funds.
  6. Most importantly he knows what happens in his life (retirement income, health) is far more important than what happens in the market.
  7. He knows that what goes up will come down and what goes DOWN too will surely come UP (The concept of Reversion to the Mean – He does not know the label or technical aspects but understands the core message completely).

I see a lot of these traits in many investors. They are clear about their objectives and do not let external noise impact their investments and most importantly themselves.

So, what does my dad do when there is so much noise? He simply does NOTHING. By doing this not only is he able to BUY LOW when the markets are down, but he is able to capture the upside when the markets do turnaround.

Leonardo Da Vinci said this centuries ago “Simplicity is the Ultimate Sophistication. This rings a bell even today and it not just applies to many things in life but applies perfectly to investing. Learn to Keep it Simple, Ignore the Noise, Invest and most importantly Stay Invested. My Dad seems to have perfected this art and I am sure each one of us can too.