Amitabh Bachchan’s popular game-show ‘Kaun Banega Crorepati’ (KBC) recently concluded its 11th season. The show provides a lifetime opportunity to one out of a million households to earn money and fulfill their life-long goal. The show is inspiring in many ways. The contestants’ struggle and the hardship to reach the elite ‘hot-seat’ represents perseverance and endurance. When the contestants are in the spotlight, they are exposed to difficult questions and forced to make quick decisions, which tests their knowledge, skills and composure. Lastly, for their efforts they are rewarded handsomely with money.
We mustn’t forget our host Amitabh Bachchan, who has had an astounding career as a Bollywood actor, has been hosting the show for the most part since its inception. One of the most hard-working and humble men in Indian cinema, he comforts the nervous contestants, empathises with their grief and gives them confidence when needed. He is one of the very few actors to have not only survived but also be successful in the industry for such a prolonged period.
The lessons from the inspirational story of KBC have an uncanny similarity with Alan Greenspan’s investment philosophy. Sound’s too far-fetched? I’ll explain how.
Alan Greenspan was the Fed chairman from 1987 to 2006, the second longest serving chairman in the history of the United States. He is an economist by profession and often known as the ‘inflation hawk’ for his focus on price control and trading strategy called - ‘Greenspan put’ - which minimised risk and rewarded safe returns to investors. During his time as Fed chairman, upon observing markets closely, he had devised some unique investment philosophies.
First being the ‘sleeping point’, which states that investors holding stocks for long periods and grinding their teeth through short-term fluctuations in stock markets are bound to do better. This also places emphasis on investing in a portfolio of stocks for the long term and not undertaking short term trading to try and time the market.
Second being that investors should keep ‘irrational exuberance’ in check. When it comes to investing, one mustn’t rely on emotions. The numbers must support and backup the rationale behind the investment. When it comes to investing, one must do due diligence, just winging it or playing it by ear won’t yield desirable results.
Lastly, investors should beware of ‘home biases’ while investing. Investing, saving only in the home country may result in investors undermining their risk. Diversifying a portfolio across countries is the key to minimise risk. To get expertise in foreign and domestic assets, Sebi recommends consultation and investments through vehicles like mutual funds, ETFs, among others.
Upon looking closely, we can see the familiarity between the two cases. The ‘sleeping point’ philosophy is represented by the perseverance and endurance the contestants undertake to reach the ‘hot-seat’. The ‘irrational exuberance’ philosophy represents the composure and calmness that the contestants must maintain while making their decisions, coupled with the importance of knowledge of the subject. The ‘home biases’ philosophy represents the importance of expert opinion and the use of life-lines (these are a part of the game-show, where contestants can phone a friend, take an audience poll if they don’t know the answer) to mitigate risk and consult an expert in times of need.
With the Indian economy expected to grow at 5 per cent in FY20, the above philosophies are the need of the hour. We need to keep investing, have faith in the system and not get bogged down by a few failures. Keeping a long-term horizon in mind, sensible and smart choices would lead us to our goal. Ultimately, the rewards are mouth-watering, just as it is for the contestants of KBC. With must have the famous motto in mind - ‘ade raho’ - or keep moving and don’t stop till you reach your goal.
The author is Head - Passive Investments and Products, DSP Mutual Fund