Prudent investing and career planning – the parallels | The Financial Express

Prudent investing and career planning – the parallels

Successful portfolio managers invest in stocks that consistently deliver better than market returns over a long period (e.g., Asian Paints, Pidilite and Titan).

Prudent investing and career planning – the parallels
Financial advisors never tire of emphasising the value of disciplined investing and the benefits of compounding. (Photo source: Pixabay)

By Sudheesh Venkatesh, 

Fourteen years ago, I wrote on the parallels between prudent investing and career planning for a financial newspaper and the editors curiously chose to headline it ‘Cashing in on your careers’. In this article, I offer a fresh take on the topic.

1. Fundamentals matter:

Successful portfolio managers invest in stocks that consistently deliver better than market returns over a long period (e.g., Asian Paints, Pidilite and Titan). The reasons behind such choices are strong fundamentals, such as superior products, dominant market positions, good cost structures, and high corporate governance standards. We look for similar fundamentals in organisations where we hope to start our careers. We look for places that:

a.       Address a large external opportunity (e.g., infrastructure, healthcare, and e-commerce) 

b.       Have the competitive ability to maximise that opportunity (capital, technology, and people, for example), and  

c.       Have leadership teams with proven capacities and character

From stability to respectability, the benefits of a thoughtful career choice cover a wide range of plus points. This includes the financial growth of the employee, resulting in above-average salary growth and wealth creation.

Also read| Exploring the therapeutic effects of yoga and its ability to increase quality of life

2. Discipline is key:

Financial advisors never tire of emphasising the value of disciplined investing and the benefits of compounding. They recommend Systematic Investment Plans (SIPs) for long-term gains. They also advise us to spend only after we have saved and invested the amount planned for the month. 

With careers, too, discipline is key. For instance:

  • Consistent well-directed hard work, building a reputation for reliability
  • Being organised with schedules that flow from the priorities
  • Continuous investment in learning and
  • A balanced life that values career, family, health, and personal interests.

Discipline is the foundation for many other qualities. Patience, for example. As my friend, the late Chandramouli Venkatesan, says in his book Catalyst, careers are like the two halves of a football match. The rewards are disproportionately stacked up in the second half, and we can reap those only if we play well in the first half. And good performance cannot come without a considerable degree of discipline.

 Also read| Swachh Toycathon: Union govt launches unique competition to make toys from waste

3. Patience pays:

Now it is time to reward patience. This brings me to the investment advice that many of us may have heard innumerable times: ‘Don’t churn your portfolio too often’. In other words, have patience. If an investor had bought a share of Bajaj Finance at Rs.67 in Aug 2011 and forgotten about it for 11 years, it would be worth over Rs 7000 today. On September 2, the stock closed at Rs. 7188 on the National Stock Exchange, having multiplied 107 times at an annual CAGR of 54%.

Similarly, in careers, it is wise not to ‘churn your portfolio too often’. A study by Michael Koch, Bernard Forgues, and Vanessa Monties published in the journal Human Resource Management shows that the careers of most Fortune 100 CEOs are characterised by steady progression towards more responsibility and little mobility between firms and industries. People who change jobs frequently and go after every new opportunity eventually end up underachieving. 

A common failing in both investments and careers is the short-sighted chase for the highest return. This is caused either by greed or a herd mentality. Like a batsman playing Test cricket, focus on the long-term average while assessing investments and careers. Leave the strike rate to the Twenty20 format, which in any case is not how a lifetime career is meant to be. 

4. Concentrate when sure:  

Ace investor Rakesh Jhunhunwala’s portfolio had 32 stocks of companies where he held more than 1% of the shares. This portfolio was valued at Rs.32759 cr in Aug 22. Of these 32 stocks, 2 stocks (i.e., Titan Company Limited and Star Health and Allied Insurance Limited) contributed to Rs.18281 cr. In other words, 56% of his wealth was concentrated in just two stocks he believed in.

Similarly, if we are working in good companies that have a track record and a future, and our careers are progressing at a fair clip, it helps to consolidate and build rather than restart all over elsewhere.

5. Do not be afraid of making a mistake but move to safer avenues as you age: 

Investment gurus caution against emotional and behavioural biases in financial decisions. They tell us to never get attached to any stock and suggest we cut our losses when the writing is on the wall. For example, they recommend that as we age, we allocate more to assets that are safe and yield a guaranteed return as opposed to high-yielding and risky ones.

We can apply the same logic to someone making a career choice. In his book Managing the Careerist, Brooklyn Derr describes five categories of career orientations: Getting ahead, being secure, going high, being free, and finding balance. We will likely move between these categories over time. It is good to experiment early, learn what makes us happy, and, as we gain experience, settle into stable careers.

(The author is Chief Communications Officer, Azim Premji Foundation. Views expressed are personal and do not reflect the official position or policy of the 

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.