Wealth Creation is a Marathon, Not a Sprint

Wealth creation is often misunderstood. Many of us approach it with the urgency of cramming for an exam, expecting immediate results and a straightforward formula. However, true wealth grows like a well-nurtured plant. It requires patience, discipline, and consistent care. This blog explores why long-term investing demands both resilience and humility, and how you can navigate the journey without succumbing to impulsive decisions.

Investing is Not an Exam

Investing isn’t a one-size-fits-all endeavour. Unlike school exams, where correct answers guarantee marks, no single strategy ensures consistent success in the stock market. Some investors swear by value investing, others by momentum, and still others by index funds. All these methods have produced winners and losers, but none guarantee results every time.

The market is unpredictable, and there will always be someone who earns more in the short term. However, the goal isn’t to beat others. It is to achieve your financial objectives.

The Luck Factor

Luck plays a bigger role in investing than most of us like to admit. As Michael J. Mauboussin points out, one way to differentiate luck from skill is by asking, “Can you lose on purpose?” If the answer is no, then luck is likely involved.

For instance, during the oxygen shortage in the pandemic, Bombay Oxygen's share price doubled, even though the company had exited the oxygen business years ago. Similarly, investors mistakenly bought the wrong Zoom stock during the pandemic, seeing massive gains because of name confusion. These incidents highlight how even poor research can sometimes yield returns, underscoring the importance of focusing on long-term discipline over short-term luck.

Managing Ego and Market Noise

The temptation to outperform others often leads investors astray. Chasing market trends, switching strategies impulsively, and abandoning plans during downturns are common mistakes driven by ego. But the Bhagavad Gita provides timeless wisdom here: “Hell and self-destruction have three gates: lust, anger, and greed.” These impulses often lead to poor financial decisions.

The market doesn’t care about your forecasts or personal milestones. Success in investing lies in patience, discipline, and the ability to stick to a plan even when others seem to be earning more.

Compounding: The Silent Wealth Builder

Compounding is the cornerstone of wealth creation. It works quietly in the background, multiplying your money over time, but only if you allow it to do so. The longer you stay invested, the more profound its effect.

Let’s illustrate this with an example:

• Monthly SIP: ₹10,000
• Annual Return: 12%

Future Value:

• 5 years: ₹8.25 lakhs
• 15 years: ₹50.46 lakhs
• 25 years: ₹1.89 crores

These figures assume consistent investments and no withdrawals. What makes compounding powerful is its exponential nature. Most of the growth occurs in the later years, making time the most critical factor.

Why Timing the Market is a Trap

Timing the market is one of the biggest mistakes new investors make. They buy high when markets are euphoric and sell low during downturns, locking in losses. While the urge to act on headlines and market news is natural, it often leads to underperformance.

Morningstar research shows that investor behaviour (like stopping SIPs during market dips or impulsively reallocating portfolios) can reduce returns by 2.5-5% annually. For context:

• A fund offering 12% annual returns might yield only 8-9% for the average investor due to poorly timed decisions.

The solution? Stay invested. Consistency beats cleverness when it comes to long-term investing.

The Role of Personal Goals

Investing is personal. Your strategy should reflect your life goals, not the latest trends or what your peers are doing. Start by answering:

• What am I saving for? (Retirement, education, or a home?)
• What is my time horizon?
• What level of risk am I comfortable with?

These answers will guide your asset allocation – how much to invest in equities, debt, or other instruments.

The Adviser Advantage

While many prefer DIY investing, the role of an adviser in managing behaviour cannot be overstated. Financial advisers provide value by:

1. Encouraging Discipline: Advisers help clients stay invested through market volatility, preventing panic-driven decisions.
2. Setting Expectations: They align your goals with realistic outcomes, ensuring you don’t chase unrealistic returns.
3. Rebalancing Portfolios: Regularly reviewing and adjusting your portfolio keeps it aligned with your objectives.
4. Saving Time: An adviser takes the guesswork out of investing, allowing you to focus on other priorities.

Morningstar estimates that advisers add 2.5-5% in annual value by preventing emotional mistakes and optimising investment strategies.

Practical Tips for Mindful Investing

1. Automate Your Investments: Setting up an SIP ensures regular contributions without needing to think about it every month.
2. Diversify Your Portfolio: Spread investments across equities, debt, and other asset classes to balance risk and returns.
3. Review Regularly: Assess your portfolio annually to ensure it aligns with your evolving goals.
4. Ignore Market Noise: Avoid making decisions based on short-term market movements or sensational headlines.

Real-Life Example: The Power of Patience

Consider Ramesh and Priya, two professionals in their 30s. Both started with ₹15,000 monthly SIPs in equity funds at a 12% return.

• Ramesh paused his SIPs during a market downturn, waiting for the "right time" to reinvest.
• Priya stayed the course, continuing her investments regardless of market conditions.

After 20 years, Priya’s disciplined approach resulted in ₹1.65 crores, while Ramesh, with his intermittent contributions, ended up with ₹1.1 crores. This is a clear example of how consistency trumps timing.

Mindset Matters

As Charlie Munger wisely said, “The big money is not in the buying and selling but in the waiting.” Adopting a long-term mindset, managing emotions, and focusing on your unique goals are the cornerstones of successful investing.

'Badhao' Your Wealth

Wealth creation is not a sprint; it’s a marathon that rewards patience, discipline, and mindfulness. Like a plant needs water and sunlight to grow, your wealth needs consistent investments, time, and the compounding effect.

Instead of chasing quick wins or comparing yourself to others, focus on your own journey. With the right strategy and mindset, you can achieve your financial goals without unnecessary stress.

Remember, the market may be unpredictable, but your discipline and patience are entirely within your control.