Edmund Hillary and Tenzing Norgay... In all likelihood, you would have come across these names during your school days. The reason for them being a part of your school curriculum was the fact that they were the first people to reach the summit of Mount Everest and return alive, a feat they achieved on May 29, 1953.
However, not many of us would be aware that this was the 9th expedition to attempt the first ascent of Mount Everest and with due respect to everyone involved in the previous 8 attempts, hardly anyone remembers the story of those attempts. Those 8 attempts were marred by exhaustion, lack of appropriate equipment, perhaps a wrong or riskier approach to the summit and instances of quitting the mission in the face of adversity. In fact, the 1953 mission actually had 13 members, two of whom—Charles Evans and Tom Bourdillon—launched an attempt to summit just 3 days before Hillary and Norgay, and came within 300 feet of the summit before having to turn back due to exhaustion.
Just like an Everest Expedition, an investor’s pursuit to scale the mountain of financial freedom needs many things to fall in place—few of which may be in his control while others may not.
While you may rarely face adversities as catastrophic as an avalanche during your investing journey, one would certainly encounter changing economic and market conditions, which are as volatile and as fickle as the weather one could encounter in the Himalayas. Expecting returns from investment to be linear in nature without any ups and downs is naive, to say the least.
There could be many routes one could take to reach the peak of Mt. Everest. However, the difference between selecting a risky faster route versus an appropriate route to the summit can be understood by the catastrophic consequences of failed expeditions.
Likewise, while one may be tempted to time the market and investing lump sum may seem an alluring proposition to reach financial goals soon, taking one step at a time, by taking SIP route, is advisable as the benefit of rupee cost averaging means that your journey takes advantage of volatile conditions.
The importance of carrying the right equipment for an expedition cannot be emphasized enough. Although the Swiss expedition of 1952 had got the route right and got tantalizingly close to the summit, rudimentary oxygen equipment, which could be used effectively only at rest and not on the move, proved insufficient for the task. Likewise, selecting the right set of mutual fund schemes considering your risk appetite, investment horizon, targeted corpus is as important as deciding to start a SIP.
Before Hillary and Norgay, multiple mountaineers came close to scaling the summit but had to retreat owing to various factors. Few hundred feet separated them from virtual celebrity status and the immortality of sorts. On the other hand, Hillary and Norgay were catapulted into a different league altogether as they stayed put the entire course. Something similar to this happens in one’s pursuit of wealth through SIPs. Those investors who stop SIPs prematurely and worse still redeem the corpus due to volatile market conditions end up creating a significantly lower corpus as compared to those who continue SIPs and stay invested through thick and thin.
The role of Sherpas on Mount Everest expeditions cannot be undermined. They are experienced local climbers who not only manage the logistics but also prepare the routes to be followed by foreign climbers as they are well versed with the local terrain and climate. Tenzing Norgay, a Sherpa, had participated in 6 previous attempts before the one with Hillary and his experience proved priceless. As an investor, the role of a trusted, knowledgeable and experienced financial advisor in charting a financial plan and selecting the right mix of instruments and asset classes cannot be emphasized enough.Lastly, just like it would be absurd to expect a long staircase with pleasant, predictable weather en-route to Mount Everest, it would be preposterous to expect one’s investing journey to be consistently smooth with predictable market conditions. Just like an able mountaineer, a good investor needs to keep climbing, one step or rather one SIP at a time, without being overwhelmed by volatile conditions or the prospect of a huge mountain to climb.
"Every mountain top is within reach if you just keep climbing.” — Barry Finlay —Ashok T Kanawala is Vice President - Products & Business Development, HDFC Asset Management Co. Ltd. The views expressed are personal. Disclaimer: Investors should obtain their own independent advice before taking a decision to invest in any securities. Mutual fund investments are subject to market risks, read all scheme related documents carefully.