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On Television and in gatherings, we hear people who talk about the amount of easy money they have made. Often, they will innocently rub it in by telling us that it was only common sense. It is obvious that most people do not make that kind of money, else who would want to listen to those who have hit the jackpot. It would become small talk. In a quiet corner of such gatherings, and definitely not on National Television, will be a few honest people who will tell the uninteresting truth. That Returns cannot be predicted with certainty. The greater the certainty of a return, the lower is the actual return. Take the example of a bank deposit. How certain are we of getting our deposit back with interest? Quite certain, right? And that's why deposit rates are as low as they are. So, are we saying rich people like Elon Musk (presently the second richest person on the planet) did not know that his investments in Tesla will be worth over 120 billion dollars one day (Rupees Nine Lakh Crores)? Have you seen him on Television? He is such a confident person. You think, he would not have known that one day his Company Tesla would be valued at 600 billion dollars (Rupees 45 lakh crores)? Yet, as some of us know, there was a time Musk was trying to sell his company at a valuation of 60 billion dollars, or one tenth its today's value, without success. Doesn't that tell you something? Musk, one of the world's top two richest people today, could not see that the value of his OWN company would be 10 times of what he was willing to sell it for! We need to notice, understand and realize the huge amount of risk Musk has been willing to take and so many other investors continuously take. (Even today, HALF his shares are pledged against loans). Unfortunately, Television doesn't run after telling us more about those people who took risk and lost money. The person we met at the party is not interested in opening his books to show you the bright red marks of losses that he has incurred on the way to earning the big jackpot. Or the people who never won the jackpot inspite of taking all the risks. We cannot choose returns but we can open ourselves to the possibilities. We do that by choosing the quantum of risk. A choice which we can intelligently and wisely make. And how do we choose risk? More about that another time!! - Devang Shah January 1,2021 |
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Right Returns |