Becoming a crorepati is just not about reaching a financial milestone but developing a mindset to manage what comes next. Read to know how you can ride the emotional rollercoaster of becoming rich based on your investments
For years, Rajesh Kumar dutifully invested Rs 40,000 every month into a systematic investment plan (SIP). Kumar was not chasing quick riches, he simply believed in the power of compounding. And for nearly eight years, his plan seemed to work like a charm - until it worked a little too well.
One day, Kumar realised that his investments had taken off, crossing above the Rs 1 crore mark. Though he always wished it would happen, Kumar wasn’t fully prepared to deal with the feelings that came with it. As the market’s daily fluctuations began to impact his portfolio by lakhs, he found himself gripped by a new, unfamiliar anxiety. When he saw his portfolio gain or lose more than what he had invested in an entire year, Kumar started getting the feeling of ‘losing control’. His solution? He sold off his mutual fund investments and bought property, something he felt he could manage with greater peace of mind.
Rajesh’s story is about many retail investors losing control of their gains when their investment portfolio grows in volume and size. The emotional stakes also change and evolve as per the investment. Investors happy about their gains would suddenly find themselves fixated on the losses. And in the equity market, where a 2-3 per cent movement is a common occurrence, these fluctuations could translate to lakhs for a big portfolio in a short period of time. It is no wonder that many like Rajesh would feel the need to regain control by shifting their assets into less volatile investments like real estate or gold.
The core of the issue lies in the psychological phenomenon known as ‘wealth shock’. As a person’s portfolio volume increases, its volatility becomes more palpable in absolute terms. For instance, a 2 per cent fluctuation on Rs 1 crore is Rs 2 Lakh - no small sum. But for an investor who was used to contributing Rs 40,000 a month, this swing represents a considerable change from the steady, predictable growth over the years.
“Many of us are not yet ready to become a crorepati,” said Sujith S S, CEO of Moneydhan Investment Advisory India, a Sebi-registered investment advisory corporate, in a viral LinkedIn post that sparked a discussion among investors. He highlighted a crucial reality - ‘it’s not just about reaching that coveted 1 crore mark, but being prepared to deal with the psychological impact of managing it.’
A portfolio that moves by lakhs, not thousands, can be unnerving, particularly for those who have spent years getting comfortable with regular contributions and incremental gains.
Financial experts would agree that the emotional journey of investment doesn’t end once you hit any significant milestone, rather it often becomes more intense. Says Sujith, “When an investor sees a year’s worth of SIP contribution evaporate in the market correction, it’s natural for anxiety to set in. The larger the portfolio the harder it can be to maintain emotional equilibrium because the stakes are much higher.”
Talking to Outlook Money, Sujith suggests following strategies through which investors can manage emotions during significant fluctuations in their large portfolio:
1. Mindfulness and Awareness: Investors should be mindful of their emotional responses to market changes. Recognising when you feel anxious or happy about your portfolio can help understand the emotional triggers.
2. Zooming Out: Investors need to keep a long-term perspective. With the ease of constant monitoring over your portfolio via broker platforms like Zerodha, Groww, etc. investors have first-hand accessibility to see the daily fluctuations in their portfolio. Suggests Sujith, “Investors should ‘zoom-out’ and consider the overall performance of their investments over a more extended period rather than focusing on short-term fluctuations.” For instance, even if there are significant weekly losses, the overall market may still be up over the year.
3. Know The Time Horizon: Even after a continuous investment of eight or ten years, many investors may get triggered by a downward momentary fluctuation in their portfolio because they are not clear about the time horizon for which they want to be invested. “Investors should ask themselves when they will need the money back. If they have a longer investment horizon, they can afford to ride out volatility without panic.”
4. Diversification: As the portfolio grows, diversifying investments can help you reduce risks and ride through market volatility. “This includes shifting from more volatile investments like small-cap stocks to more stable options such as large-cap or index funds. One can also relocate funds to assets like gold that can serve as a hedge against market downturns.
5. Professional Guidance: As the portfolio grows beyond your review capabilities seeking professional guidance is important. Gautam Shah, Certified Financial Planner (CFP) and Chartered Retirement Advisor (CRA) commented on Sujith’s post, “It’s a classic example of what one wants to build, a mud house or a villa. To build a mud house one doesn't need an architect, whereas to build a villa/apartment Do-it-Yourself (DIY) is out of the question. Similarly, when the corpus is small it can be self-managed, but when it grows beyond a limit (which varies from person to person) one needs an advisor.”
Says Sujith, “Financial planners study the personality type of a person and how it would reflect on their investment psyche. For instance, let’s take two categories of people. Category 1: Someone with a large portfolio who has a big concentration in one or two stocks. Early on, they invested a huge amount of money, say Rs 20 lakh, in a stock which over the period has generated a corpus of over 1 crore. So, these people have made money in that one mode. Category 2: People who have generational wealth and are not scared of losing money or taking a hit on their investments because of 20-30 years of experience in asset diversification. The people belonging to category 1 may want to repeat the same process to generate the same result which would not work every time. Though people in both categories require a financial plan, the former needs it the most.”
In a situation where your investment portfolio has taken off because of some good investments, it is important to professionally manage key decisions like diversification, re-location or creating an exit strategy.
For some investors, the psychological burden of a large portfolio may become too much to bear. If the anxiety of seeing large fluctuations is impacting your quality of life, a partial exit might be the right move. "Money is just a tool for good sleep. If that money is causing stress during sleep, then you have to diversify into gold and real estate,” says Sujith. But this decision should be driven by financial logic, not fear.
If you’re shifting to property or gold, ensure it aligns with your long-term goals and cash flow needs. For example, though real estate offers stability, it is not as liquid as stocks and might not provide the same long-term returns.
Crossing the I crore mark should be a moment of celebration, however as Rajesh and many others have found, it also brings new challenges. The journey from growing a portfolio to managing a large one will require both financial acumen and emotional intelligence. If you recognise your psychological pattern vis-a-vis the wave portfolio fluctuations, you can plan and be at peace with success without feeling overwhelmed by it.
Ultimately, becoming a crorepati is just not about reaching a financial milestone but also about developing a mindset to manage what comes next.