Much ado about nothing – If you describe a situation as much ado about nothing, you mean that people are making a lot of fuss about something which is not very important.
In his book Fooled by Randomness, Nassim Taleb wrote that “news makes idiots of us because it gives us confidence, not insight.” Like a PhD in macroeconomic theory. Now is one such time of the year in India, when after the Union Budget is announced, a lot of us are feeling and behaving like PhDs in macroeconomic theory.
Like a school friend of mine, who called up recently to ask my views on the Budget, and before I could say, “I don’t have any view!” lectured me for thirty minutes on his views.
“How should my investment strategy change with the Budget announcements?” he asked near the end of the call.
“Why should it change at all?” I asked him.
“Shouldn’t it?” he asked back. “Don’t Budgets matter in your investment decision making and journey, given the big tax and economic announcements made? And also because, given these big announcements, some stocks you own or want to own may rise or fall by big margins?”
“I will send you something that may answer your question,” I told him.
This is what I sent him –
Budgets, with all their economic mumbo jumbo and despite their (sometimes) big announcments, don’t really matter to you as an investor in the larger and longer scheme of things.
What really matters is – whatever the tax you pay and whatever happens to the general economy – how much you save regularly and how well you invest those savings.
But the problem is because being frugal despite the economic environment and saving and investing well does not make newspaper headlines, people don’t worry much about these aspects of wealth creation as much as they worry about what is more vivid, like Budget announcements and sharp stock price reactions owing to them.
Avoiding and not reacting to the news, like Budget announcements – unless it’s about a real impact on the future cash flows of the businesses you own – is a competitive advantage in investing.
The longer you remember it through the ups and downs of the markets, and the more you use it in the way you invest, the better off you will be in your wealth creation journey.
Wonderful
If we think deeply, whatever you are saying it is true sir. We can’t control something which s not in our control. And the budget for the country is one among them.
Solid perspective. The Budget doesn’t decide how we lead our lives in the long term. We do.
If we overspend on wealth-draining liabilities instead of investing more in wealth-creating assets, no budget in the world can secure our own future.
Good One
The budget is exaggerating phenomenon. We fall in the trap of Quantitative measures put forward by Media agencies and the government officials or some group of peoples. Whatever the budget is , there is always an way to save and invest. Only the thing is How smartly you do ?
So at the end, budget is speculation, investment is real.
Savings for investment is impacted with budgets, motivating youngsters not to save by new tax regime is something which is wrong decision, I never regret savings I did when I forcefully invested in ELSS in beginning of my career, I disagree that in long run there won’t be any impact, normal man’s savings do get impacted and so are investment capacity.
with due respect sir this seems to be stock market and wealth creation perspective but on a whole this was the moment when the country could have opened up a bit more to lure investments , industries and thereby create job opportunities. This is what the country was expecting and many more resolutions to cure some of the ailing industries.
With regards to wealth creation your analysis is pin point.
I donot fully agree with this view point. Budget definitely does effect our returns to some extent. For example by increasing Tax on cigarettes,ITC profit margin is effected and by making IT not dependent on deductions, life insurances margin is effected. So now instead of waiting for intended returns for 10 years investor must wait for 12 or 13 years.
Totally in line with the investment ideology you communicate. A similar instance happened with me too, when few of my friends asked me the same and I said ignore it.
Budget has all the attention with it’s AWAITED rhetoric.
The journey of building wealth is a silent & long one – no band , no bangs , no roadshows !!!
Rightly put Vishal, The wise will never wait OR fall for the gimmicky former
Very insightful . Thank you for writing this.
Wonderful
Good one
useful information thanks for sharing it.