The Investor’s Triad: Patience, Prudence, and Purpose
Dear Reader,
Thanks for visiting the site . As this is the first of many letters, I thought of just laying down the basic principles / framework through which one should look at at investments.
Patience, Prudence, Purpose.
Patience
I believe patience is the most underrated virtue of any good investor. In this hyperactive era of constant notifications and distractions, being patient and focused is super critical, and I believe it is a superpower to get the results one needs . The return an investor needs versus what they want is a different ball game altogether, which can lead to sub optimal performance and constant chase for next hot theme. In the field of investments , excess behaviour is often counterproductive. More so with respect to equities which are an inherently volatile asset class but also provide a potential for massive wealth creation opportunities.
Given the lacklustre performance of Indian equities over the last 24 months & superlative run up post Covid base, investors tend to ignore the basic principle- every asset class, including equity, has its own characteristics (including the occasional bull and bear cycle) , and it would be wrong to assume that one can get linear returns from such highly volatile products . For equities ,future returns are always a slave to earnings growth and starting valuations. Hence expectations have to be moderated accordingly.
When things are going well, investors swing to excessive euphoria... And when things are bad, they swing toward depression and panic, viewing everything negatively and assuming it can only get worse - Howard Marks
It is always important to remember that volatility is a key feature of the equity markets and not a bug. It is a price to pay for higher returns beating inflation over long term. One should always remember that even though history does not exactly repeat, it always rhymes.
Indian markets have had flat markets for many times(!) in the past like Oct '21-June '23,Jan'18 to Nov'20, Mar'15 to Feb'17,Dec'07 to May'14, and many more. When we will exit the flat current phase from late 2024 is anyone's guess, but the advantage offered by such flat & dull markets is time and value correction for equities, which sets the base for the next bull run till it turns back again to bearish phase. As a long-term investor, one should be more happy when the markets are sideways/falling, as it allows us to get better prices for investing and as things would be on sale. This is an absolute contrast to what an investor would do in the physical world, that is, waiting for an e-commerce or a discount sale before purchasing her or his own favourite products.
What one can be absolutely certain of is that we will see intermittent periods of pessimism and optimism in the future. Having patience across all the different phases can work wonders for the long term investor.
One needs to be patient with the results but impatient with maintaining discipline and refining the process.
Prudence
Through prudence, what one can strive to achieve is to nurture capital through the right process. It is very important to not get carried away with recency bias and chasing FOMO themes. We did witness something quite recently where the inflows into the commodity ETFs (gold/silver) far exceeded those of the equity inflows, as per the Jan 2026 India mutual fund SIP data. Such irrational exuberance usually marks the peak of such euphoric cycles, similar to the mid- and small-cap mania of H2 2024.
One can currently see a similar situation play out in the global AI tech space, where all the momentum and investor money is piling onto the AI trade. As per estimates, the investment in AI by the hyperscalers as a percentage of US GDP now rivals the telecom & internet investments made at the peak of the dot-com boom. Emerging market index is now overweight on two countries ( South Korea & Taiwan) due to semiconductor stocks run up, hence, an investor opting for international allocation right now might not be diversifying but, by the way, indirectly exposed to the global AI trade which is due for reversal. Many of you would be thinking about international diversification now, but this might not be the right time. It is always better to be safe than sorry. The appropriate time to think about it was probably much earlier, and right now is the time to be extra cautious . This is not to say that AI does not have value or the tech bubble will pop anytime soon, but in the current situation, the risk-reward doesn't look to be too favourable.
Quite often, one tends to confuse the outcome and the process taken to achieve the outcome:
Bad Process + Good Outcome -> Luck (Can it be repeated?)
Bad Process + Bad Outcome -> What were you even expecting?
Good Process + Good Outcome -> Expected Results
Good Process + Bad Outcome -> Bad Luck(getting into car accident despite seatbelt)
If you remember Sir Isaac Newton, who discovered gravity, he also gave in to FOMO . He lost a massive portion of his life savings in the South Sea bubble way back in 1720, giving us his famous quote: "I can calculate the motion of heavenly bodies, but not the madness of people."
The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own affairs. -Warren Buffett
Purpose
In the realm of personal finance, it is very essential to understand an investor's needs, their aspiration, and wants. Understanding the purpose of the invested capital is fundamental to planning for the milestones and helping to remain focused on respective goal objectives.
Once the purpose of the capital is determined, it becomes easier to not get swayed away by the allure of extra returns or extreme pessimism, and it helps to maintain a disciplined approach, particularly during periods of market volatility where the temptation to chase a quick profit or siting out (exiting market during wrong times) can lead to favourable outcomes. Having an open discussion regarding the financial needs allows for a balanced view on the pros and cons of every investment option available.
Hope this post was able to provide some clarity for your investing journey.
Disclaimers
The views mentioned above are meant for an educational and informational purpose only and should not be construed as investment advice. Readers are encouraged to seek professional advice from registered professionals, conduct own diligence, and stick to regulated products for the safety of their investments.
The author is a registered mutual fund distribution license holder with ARN 340081.
Mutual fund investments are subject to market risks. Please read all scheme related documents carefully. Past performance is not indicative of future performance.