A trip to Lonavala


Last weekend was a long one because of a holiday on Friday. For Mumbaikars the best and easiest outing is a trip to Lonavala. Immediately the lovely lady of the house started stuffing the bags with food - she knew that would be the main focus of the family over the extended weekend. We normally go overboard on stuffing our stomach during such times and take a short break from our diet food.

Meanwhile, the intelligent & smart head of the family will see to it that his car is in perfect condition. We know that Lonavala is roughly 90 km from Mumbai and takes nearly 2 hours reach. We travel at an average speed of 45 km per hour, but we know that we continuously keep on changing our speed based on various conditions.


During the drive, I reflected on the choices we make when deciding to drive at particular speeds during different circumstances. I tried to understand how our mind subconsciously analyzes various parameters or conditions and chooses to drive at a particular speed. Following could be various reasons for driving your vehicle fast or slow:

  1. Whether the car is Alto 800 or Honda City.

  2. Whether the driver is experienced or not.

  3. State of mind of the driver. If angry, you could be driving rashly.

  4. Car condition.

  5. Passengers in the car, if youngsters then you tend to drive faster and if seniors then you try to drive safely.

  6. Weather condition, with rains we drive slowly.

  7. Road conditions.

  8. Urgency to reach the destination.

  9. On getting teased by the other faster car. Why do we fall prey to such childish behavior?

  10. The type of song on the radio or CD. The car speed tends to increase on faster numbers.

  11. Whether you are with your girlfriend. Youngsters may want to impress them with their driving skills.

  12. Fuel in the car. If I am low on fuel, I might drive slow to get a better mileage.

  13. Whether its my own car or a friend's car. We tend to drive others car more carefully.

  14. Knowledge about the route. If I have to stop at every corner to check about the route then I am going to get slower.

  15. It also depends which part of the day am I travelling. I could drive slower at night.

  16. Traffic conditions.

And there could many more. Lesson to be learnt here how we are managing the risk. Sometimes we reduce the speed when we see more risk and keep the speed at manageable levels and increase it only when we are able to manage the higher speed.

Here's what we need to understand - our mind deals with RISK in totality. The mind counts and evaluates the risks on multiple factors as listed above simultaneously. On some parameters, the risk would have increased and on some it would have decreased. The mind selects the speed which it is able to manage. Thus the risk to the mind at a slower speed or a faster speed is same if he rationally analyses all the factors and selects his speed. However a human mind can become irrational at times and select a speed which is not in consonance with his ability to manage and then it becomes rash driving. Mind you a manageable speed could be different for different people.

Similarly in investments each investor has to understand and find out his manageable risk level. To avoid accidents, he just cannot copy others. There are many who drive the car properly and there are many who prefer the bus, taxi or a chauffeur. Similarly in investments there are many who can themselves manage their investments, for others there are mutual funds (like a bus) or PMS (like a chauffeur driven car).

One can never reach far off destinations by just walking (akin to investing in fixed deposits).

Choice is always available, guts to make a decision is not always available.

Mukesh Dedhia, Ghalla Bhansali Securities, Mumbai


Editor's note

Mukeshbhai has a rare ability to simplify and explain key investment fundamentals in a manner that the aam-aadmi readily understands. Check out his previous gem on WF: Think of equity as your third child. Put both these pieces together, and you can explain everything that an investor really needs to know about investing successfully. Beyond this, one can argue, is unnecessary jargon. Mukeshbhai runs a very successful financial advisory practice, but is really a teacher at heart: a teacher who does not hide behind complex jargon to confuse investors and make them depend on him, but a teacher who truly empowers investors by connecting with them in the manner they understand.

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