India 
Why Does a Car Need Brakes?
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A teacher was having a conversation with students on an important life lesson.
Teacher: Why do we have brakes in a car?
Student 1: To stop the car.
Student 2: To control the speed of the car
Student 3: To avoid collision
Teacher: You are right in your own way but the real reason for brakes is to make the car run faster.
Deep silence. No one had imagined this answer.
Teacher: If our car had no brakes then how fast can we drive our car? 5 kmph? It is the brakes that gives us the comfort to drive the car faster. Similarly, there are many such brakes in our life, which stop or restrict us. Our parents, teachers, friends help us to go ahead with confidence and progress in life. We tend to view their difficult questions or restrictions as brakes that impede our pace. But they are the catalyst that enable us to take risks while ensuring we protect ourselves. Without these brakes, we could slip, lose direction or be victims of unfortunate incidents. It is the presence of boundaries that creates new freedoms.
We all know that the equity asset class has the potential to grow your portfolio faster just like you increase the speed of your car. But without brakes, your investment ride is prone to accidents in terms of sharp corrections and bouts of volatility.
Here are the three crucial brakes for a smooth ride in equities
- Diversification across asset classes to cushion volatility risk
- Investing for the long term to overcome short-term volatility
- Investing regularly to keep averaging your purchase cost of units (Rupee Cost Averaging)
About the author
Satish Prabhu is an avid blogger and has written close to 300 blogs on the basics of investing. He prefers the short story-telling format for his blogs and writes motivational life stories which are then weaved to give a message on investing. While content writing is his forte, financial literacy initiatives are close to his heart. He feels that investors can create wealth not by investing more money but by improving their behaviour with money. His stories give the message of patience, perseverance and resilience, the keys behavioral traits to be imbibed by investors. He is greatly inspired by the book ‘Psychology of Money’ by Morgan Housel. You can read all his blogs on his LinkedIn page.
On the professional front, Satish is the Vice President & Head of Content & Direct Customer Engagement at Franklin Templeton (FT) Asset Management (India) Pvt. Ltd since December 2013. Prior to FT, he worked for 8 years with CRISIL Ltd. (a Standard and Poor’s Company) and for over 7 years with the Stock Holding Corporation of India Ltd. (SHCIL).
He speaks at various investor education forums, conducts knowledge sharing sessions, webinars, podcasts for investors, advisors, relationship managers, corporates, among others.
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