Don't be Ravi, sitting on cash
Ravi has been sitting on cash for the past 8 years
Ravi (name is obviously changed and masked) is a very good friend of mine from school. We were in the school prefectorial team together, took divergent paths in career - he moved to Computer Sciences, I took up Finance. Cut to 2025, Ravi is well settled in the USA and works for big tech.
While I have conversations with my friends and a lot of well wishers through this newsletter very regularly (yes, I am talking about you :) around investing, portfolio construction, asset allocation etc. Ravi is always very very skeptical. Some rich trust fund kid who was his college buddy once mentioned - Fiscal Deficit is going to go adverse in this year, GST is getting implemented - bad time to be in the markets.
What did Ravi do? - Clearly the trust fund kid has a lot to lose if he went wrong. It is only after decades, his father has accumulated generational capital so it is only fair that the trust fund kid is spot on with his analysis. Makes a call to me and says - ‘Saket, what do you think about this? Is GST really going to make life tough for us?’
I was at the lobby of ITC Gardenia, a beautiful hotel in Bengaluru trying to figure out how the first printed invoice under the GST regime would look like as there were a swarm of staff members from the finance team making sure that all POS (Point Of Sale) terminals are up to date.
In 2020, Ravi called me again. Everything I had is gone!
But, you do not even invest in Equities. It is too risky for you, right? (Trust fund kid conversation was running again)
No, my ELSS funds, my dad’s friend suggested that I buy them to get a tax break. They are all down 30%!
(FYI, this guy is in the 30% tax bracket and a 1.5L tax break does not even move the needle for him)
Once again, I was on the receiving end of disappointment in this conversation.
The good part of Ravi is how consistent he is with his skepticism and how relentless he is with sitting on cash. Makes you think - maybe he is doing something that makes him sit on cash all the time, as his cash pile keeps getting better.
By this time you have got the drift, but I will mention about one more incident that happened as early as last month.
Ravi is in town. His wife is also here with him. Calls me up and says,
“Saket, I have finally decided to invest. After all these years, I am so ready man”
“Good for you Ravi, what are you getting started with?”
“I have decided I am going to buy land.”
Me as always, Good for you man! Really good.
As a well wisher and someone who always advocates about investing in equities, it is not that I have not told Ravi about the benefits of investing or staying invested. He understands this but somehow never has the right temperament to ensure he invests. Well, what do you really do?
Elevate and Delegate.
When you know there are merits to doing something and at the same time find it hard to proceed, it is time to elevate yourself by delegating.
You see, as human beings we always tend to take too much on our own plate often leading to disastrous outcomes. Skepticism is fine, but being overtly critical to a point creates more harm than good. Sure, you do your research, make sure you are buying into something that represents your risk profile - but that does not mean you end up completely painting something in bad light.
I don’t have a problem if you end up investing money in land, it is your money and for all I could care you go and buy anything you feel can appreciate in value. The point is very simple - an asset class that is lowest on maintenance, can give you liquidity in 1 day (SEBI is also now talking about instant settlement) is very regulated and is also tax efficient should not be kept at the back burner when evaluating options.
What do you think? I would be happy to hear your thoughts.
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