Ability to Suffer

No. We are not talking about your ability to suffer. We are talking about your portfolio’s ability. But how can we use the word ‘suffer’ for investments? Are these alive?
How is your portfolio’s ability to suffer and survive?
Just assume that you had to hire some bodyguards for your security. Whom would you hire? Someone who is flashy and reckless and volatile? Or someone who is stable, secure, solid and can suffer for you during hard times? You would definitely go for the latter. After all, it’s your life that is at stake. Isn’t it?
Now consider your investments. Every now and then, markets would crash and economy would take a dive. So during such tough times, where would you park your money? As far as we are concerned, we would choose instruments / stocks which are like the second type of bodyguards discussed above. Now if we want to invest in shares, we would choose companies which have the ability to suffer and survive the downturns. These companies would not become financial dinosaurs (extinct) during tough times. These would lay low and wait for the storm to pass. These would not try to do anything heroic and would focus more on survival during such times. And as soon as the bad times start to recede, these companies would spread their wings and come out leaner and stronger.
So when economy is slowing down and markets have not done anything for last 5+ years, wouldn’t it make sense to put your money in companies which can survive the downturn? Companies which have seen such downturns in the past and have come out stronger?
Companies like GE, Exxon Mobil (in American markets) have survived depressions, recessions and downturns for a reason. And the reason is their ability to suffer (& survive). Even in India, there are companies which have proved their mettle every now and then. But even then, we look for potential multibaggers; which 49 times out of 50, would not survive the next big crash.
Always remember, more wealth has been created in markets because of ‘Compounding’ and not because of ‘Multibaggers.
Think about it.
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Written by Dev Ashish

Founder - Stable Investor Investing | Personal Finance | Financial Planning | Common Sense

12 comments

  1. i think , you are talking for direct equity investment in wide economic moat companies rather than diversified mutual funds selected DIY after researching 7-10 yrs history.. but for ordinary investors it is also difficult to find out such companies or the right adviser for selection, as i understand.

  2. We are afraid that we don't mean that. Atleast not completely.
    We do advocate buying mutual funds for long term investing. Here we want to promote the concept of buying solid companies which can survive bad times in case someone is (also) interested in direct stock pickings.

  3. can u please name few companies that fall in this catagory i mean companies that can compound money of its investors

  4. This is the downtime in Indian Stock market, do you see this as a opportunity to buy some wide moat company stocks? or wait n watch for few more months for further sell off?

  5. Would you say that investing steadily (monthly) in an RD is a better option to build a corpus for a layman than spending time researching about a stock / mf?

  6. If you have money to invest for next few years, then you can initiate buying shares of good solid companies in a staggered manner. SIP in good mutual funds can also be a good option.

  7. Money compounding machines?? That's a tough task to name future money multipliers.
    But we do like:
    1) A few boring and simple businesses (Balmer Lawries, Clariants, etc)
    2) Dividend paying businesses (Oil companies)
    3) A few more businesses which at present moment, are not cheap enough to own (ITC, HUL)

  8. Hi,

    I came across your blog a few days ago and have started reading your posts one by one. I am new to stock markets but would like to invest with a horizon of 5 to 10 years.

    Can you please suggest some stocks that you think would do well(beat inflation) over that period?

    Also i saw your comment saying ” A few more businesses which at present moment, are not cheap enough to own (ITC, HUL)”. My question is how do i decide whether this stock is cheap or not.

    Currently when i invest in a stock i look at its chart for 5 yrs or more to see the price is high or low and to see the divided payouts. Do you think this approach is right?

    I would appreciate if you could give me pointers in learning to pick value stocks/analyse stocks.

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