Be the Shehenshah of your Investments
22 Jun, 2017
Today, the name Amitabh Bachchan is pretty much synonymous with the Bollywood film industry. One of the most sought-after stars, Mr. Bachchan began his acting career with ‘Saat Hindustaani’ in 1969 and is still going strong in Bollywood at the ripe old age of 74. The level of superstardom that he enjoys today is something not many people can boast of. However, this kind of fan frenzy doesn’t simply come based on acting skills. Amitabh-ji has showcased many qualities over the years that have heralded him to be the ‘Shehenshah of Bollywood’. His life within the film industry-despite being very different from an investor’s in the market, can provide multiple lessons that can prove to be very helpful.
In hindsight, there seem to be many instances where it appeared as though Amit-ji’s career was done and dusted. But each time, he adapted and reinvented himself, giving his career a new lease of life. When he felt the time was right, he ventured into television, even though the common and conventional wisdom of the time dictated that for a superstar to act on television was akin to committing hara-kiri. In his big screen career, when the role of the angry, young man grew hackneyed and Bachchan felt he grew too old for it, he made a smooth transition to character-oriented roles (Black and Pa being notable ones) and carried them off with equal aplomb.
An investor’s investing career too has its own share of turbulence. However, when faced with a set-back, investors must look to change their course. Most investors enter the equity markets late in a bull run, when the market is close to its peak. They buy stocks at very high valuations. When the bull market ends, equities see a sharp correction in valuations, and investors get singed. Most of them swear never to invest in the equity markets again. A few courageous souls, however, introspect. They read, attend seminars, and equip themselves with knowledge of long-term, fundamental-based investing. They then re-enter the market. If they take the mutual fund route, they make use of Systematic Investment Plans (SIPs). It is those who re-equip themselves and enter the market a second time that often do well.
Amitabh Bachchan is known to be a highly disciplined man. He brings a rare professionalism to his job. He’s punctual, does not throw his weight around on the sets and is willing to listen to directors several decades younger than him. Despite all his experience, he still retains a learning attitude towards his profession.
Investment also requires discipline. As your salary increases, the amount of money that you should save and invest must increase. Instead, very often, the opposite happens in many families; expenses outrun salary increments. Instead of saving and investing more, such families accumulate more debt even as the bread earner climbs up the corporate ladder.
Back from the brink
In the nineties, Amitabh Bachchan had launched a movie production company called ABCL. Some of the movies that the company produced flopped and the company became mired in debt. More disastrously, Mr. Bachchan had in ignorance signed a few personal bonds that made him individually liable for the company’s debt. With him on the verge of bankruptcy, banks threatened to foreclose on his residence. From that low point, Mr. Bachchan dug himself out of the hole through sheer hard work.
People who have taken on too much debt can learn from his experience. They need to reform their lifestyles and not treat shopping as a form of recreational activity. Replacing their costliest debt—credit card debt—with a personal loan, will bring down their interest cost. The focus should then be on reducing debt load instead of accumulating more. People manage to pay off debt worth crores. So, while it might be difficult to do, it’s been proven that it isn’t impossible.
Cutting your losses
In the 1980s, Amitabh Bachchan ventured into politics, with encouragement from his childhood friend Rajiv Gandhi. He won a landslide victory from his hometown Allahabad against political heavyweight Hemvanti Nandan Bahuguna. However, his political career was not a success. As Prime Minister Rajiv Gandhi got embroiled in corruption scandals, Amitabh Bachchan also became a victim of political mudslinging. Realising that he was not made for the cut and thrust of politics, Bachchan cut short his political career and returned to what he did best; acting.
In investing, too, there is a fine line between knowing when to persevere and when to cut your losses and retreat. Often, during the heady days of a bull run, when all stocks are going up, investors make poor choices. They invest in stocks that have very low intrinsic value. When the bull market ends prices of these stocks collapse. Instead of admitting their mistake and selling the stock, they continue to hang on to it, hoping against hope that one day its price will recover to its previous peak. Behavioural finance refers to this as “loss aversion”. The anticipated recovery never happens and by clinging on to deadbeat stocks, investors lose out on the opportunity to put their money to use in more productive assets.
Another hallmark of Mr. Bachchan’s career is its sheer longevity. He’s still working at the age of 72, when most people prefer to fade away gently.
There is a useful lesson that investors can draw from his example. Most people retire at the age of 60 but their life spans a few more decades post retirement. Funding such a long period of retirement is challenging for most, except the very wealthy. Hence, it is advisable for most people to not stop working altogether after their careers are over. They could take up teaching, mentoring, consultancy, or try to turn a hobby into a paying proposition. By doing so, they will be able to extend their working lives by at least another 10 years. Post this, if one decides to retire altogether at the age of 70, they are likely to end up with a larger corpus which will have to fund their lifestyle for a shorter period.
Diversify your income stream
One more useful lesson that people can draw from Amitabh Bachchan’s career is the need to diversify one’s income streams. Besides acting in films, Bachchan has made a substantial increase to his portfolio from television and by acting in commercials.
Most of us can also diversify from our area of core competence into a few other related fields and turn them into money spinners. For example, most fashion designers run their own boutiques and export houses. But they can also make money by selling their designs to other boutiques, or by providing consultancy and advice to upcoming design houses. Each one of us needs to introspect and see what we can do well and turn those strengths into revenue generators.
A lot of people want to emulate Amitabh Bachchan but understandably most fall short. The values and traits of the great man are definately something to aspire to and investors, in particular could benefit from doing so.