{"id":16568,"date":"2019-11-01T11:42:55","date_gmt":"2019-11-01T06:12:55","guid":{"rendered":"https:\/\/www.fundsindia.com\/blog\/?p=16568"},"modified":"2020-03-02T16:47:56","modified_gmt":"2020-03-02T11:17:56","slug":"experiencing-long-term-equity-investing-one-short-term-period-at-a-time","status":"publish","type":"post","link":"https:\/\/fundsindia.com\/blog\/research-desk\/experiencing-long-term-equity-investing-one-short-term-period-at-a-time\/16568","title":{"rendered":"Experiencing long term investing, one short term period at a time"},"content":{"rendered":"

Imagine there are three bowls of water in front of you – one cold, one hot, and another at room temperature. Assume you put one hand in the bowl with the cold water, and the other in the hot water for about a minute. Now put both hands in the bowl containing room temperature water. The water will feel cold to the hand that originally was in the hot water, and warm to the hand that was in the cold water.<\/span><\/p>\n

While the actual water temperature remains the same in an absolute sense, you can trick yourself to experience it as either hot or cold based on how it is relative to recent experience.<\/span><\/p>\n

Now, what does this have to do with equity investing?<\/b><\/h4>\n

Equity investing is for the long term<\/a>. Based on past history, the return expectation on which you have sold equities will usually be around 12-15%. This is a message that has been beaten to death.<\/span><\/p>\n

Now, the only issue is you don\u2019t experience long term as a single point of experience. <\/span>You experience long term as the cumulation of several short terms.\u00a0\u00a0<\/span><\/p>\n

A 10-year return is psychologically experienced as:\u00a0<\/span><\/p>\n