There is no complimentary beer

There is No Complimentary Beer

Actor Hugh Jackman first appeared as a cast in the X-Men series in the year 2000. Since then, over a period of 17 years, he has delivered a remarkable performance in the next 9 installments of this movie series. Thus, making the whole franchise successful by reporting a total box office collection of whopping $5.72 Billion.


But his journey hasn’t been so easy. He had to refrain himself from enjoying delicious and mouthwatering food in order to maintain a chiseled body shape. So severe was the diet plan that he used to starve himself daily for 16-odd hours while surviving on a diet of just boiled chicken and broccoli. About 30-hours before he went for the shoot, he used to stop drinking water in order to lose water weight and look ripped. Most of us can’t even think of going that way even for a month. But he followed the same routine for the entire 17 years. Yes, 17 long years!!!


There is no easy way to the top. There is no complimentary beer.


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Nothing comes easily in life. A hike in income comes at the expense of paying an income tax to the Government. When you wish to drive a car, you have to handle the chaos of the traffic jams. Once you choose to sip natural coconut water, you have to cut the hard shell of the coconut in order to enjoy the delicacy of its water. The moment you desire to build a ripped and lean muscular body like Hugh Jackman, you have to sacrifice your cravings for sugar and junk food. 


And when you decide to invest, the returns are never achieved without witnessing the volatility and the probability of permanent loss of capital. A few days ago, the wealth of Mark Zuckerberg plunged by $18 Billion in a single day. A decline of almost 30-40% will continue happening in the future. Nothing comes for free in life. It’s always better to be psychologically prepared to face such downfalls.


Even the strongest of the strongest stocks had its own drawdowns


Over a period of 28 years, Piramal Enterprises has compounded investors money at an average CAGR of 28%. Thus, an amount of Rs.10,000 invested with Mr. Ajay Piramal became Rs.29 Lakh after 28 years. The appreciation in the price in the last 17 years can easily be observed in the chart shown below.


Rise in Piramal

Graph: Appreciation in Piramal Enterprises in 17 Years


But these returns never came easily to the investors. They had to go through the various phases of drawdowns (graph below) when the fall in stock price checked their patience and conviction to hold. Over the last 17 years, a major fall of more than 40% has occurred in more than 10 episodes. In fact, it gave nightmares to the investors when it lost its value by more than 80%, twice. 


Drawdown in Piramal

Graph: Drawdowns in Piramal Enterprises in 17 Years


The point is to show that nothing in life worth having comes easily. Not even returns from the market. Every quality stock has fallen down in the past. Be it TCS, Pidilite or any other fundamentally strong company. One has to have a thick skin to ignore the surrounding noise in order to bag the multi-bagger gains which the stock has to offer at the later stages. 


Drawdown in TCS

 Graph: Drawdowns in Tata Consultancy Services


Drawdown in Pidilite

 Graph: Drawdowns in Pidilite


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The flagship company of Warren Buffett, Berkshire Hathaway, has made its investors fabulously rich by giving a return of 2 Million percent over a period of 53 years. Like Piramal, these returns never came in a linear fashion. As per the post by D.Muthukrishnan of Wise Wealth Advisors, during the journey of 53 years, Berkshire Hathaway suffered 4 major falls.


Berkshire Hathaway fell down by 59.1%, 37.1%, 48.9%, and 50.7% during 1973-1975, October 1987, 1998-2000, and 2008-2009 respectively.


The ones who had the stomach to digest these drawdowns enjoyed the benefits once the stock recovered from the pain. One has to be emotionally strong to bear such huge downfalls in the stock price. An expectation of phenomenal returns turns into reality only at the expense of bearing the pain of single or double-digit declines. It needs the exceptional discipline of staying the course and not moving an inch. As a consequence, the big money is made only when you control yourself from taking an irrational decision during such events.


After all, there is no complimentary beer. Not even returns. 


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I would like to thank Arun for helping me out with the drawdown charts in Microsoft Excel. He publishes his thoughts on his personal blog, Eighty Twenty Investor

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The cover image has been taken from Emlii



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