Know yourself before investing!

Hello friends, so this week’s story is regarding a dear friend’s dad who while talking to me showed his apprehension against the Pakistan stock market and the government of Pakistan – I was not able to understand his issue in the beginning of the talk, but as we communicate deeper, I understood that his dad invested all his retirement savings from the gratuity and savings into stock market on recommendation of a stock broker who happened to be his relative.

I have heard so many stories where the family members who are insurance or stock brokers sell things to wrong people for a small selfish commission. The same happened in this case too – the friend’s dad was given a totally wrong perception of stock market (being in 2017 – when Pakistan stock market made a top of ±53k points, they also were tricked into the charts). He invested his retirement savings for a “promised” return in excess of 25% per annum!

The stock market crashed and never came back to the same level until now (5 years on) and he is still stuck with his funds there – needless to say the PKR depreciation hurt him big time as well. There are 2 very important takeaways from this story!

• Never put all your eggs in one basket (all his funds were placed in one single asset class)

• Never gamble on your retirement corpus.

The first mistake his dad made was that he never ventured into stock market at the right age, secondly, at the very wrong age, when he decided to invest, he went all in – that too on someone else’ advice without thinking from his own perspective. Third and most importantly, now that he incurred the loss – he will never recommend or infact always resist his kids or grandkids to go for stocks investment. Due to this, for the generations to come this family will have a very wrong perception of stock market and will probably be prevented to invest in the most efficient form of generating wealth. The only message I would give to this investor was to keep invested for as long as possible as looking at the portfolio currently he was still earning some dividend and after rebalancing it looks good for now – but the damage has already been done for which he does not have the patience any more because his age is already 65!

Going forward, please spread the word, for anyone who is investing post 50 years of age into stock market should be wary of the fact that the stock market can tank for coming 10 years and you will just be waiting and waiting for the portfolio to be green again – so only invest as much as you are able to loose for near term and be diversified specially at this age group.

In case you missed last week’s videos, below are the links:

Keep hustling 🙂