I happened to accidentally meet my friend’s acquaintance who had just returned after climbing the Mt. Everest at a restaurant. The three of us sat together at a table and ordered for snacks. The discussion I had with the climber offered a new perspective about risk.
He was a first-time mountain climber with no prior experience or exposure to climbing mountains. He was never exposed to extreme cold conditions in his life and was not sure if he would return successfully from the arduous expedition.
When asked how he did it — he said he prepared well, planned the entire trip, read a few books on mountaineering, discussed with experts who had climbed in the past, understood the benefits of traveling in a group, to follow the guide and believe in his expertise, understand about managing risks and what to carry for climbing and more importantly know the ideal month to start the expedition.
However, even though he was explained about the possibilities of extreme circumstances that could occur, when he actually faced it he found the real situation very difficult. But he was happy that he could successfully overcome them. He said his guide and other experienced climbers in the group taught him patience and perseverance which was helpful and useful.
He explained that at times they had to stay inside the tents for many hours just waiting for the weather to get better without any idea of when the weather would get better and sometimes they did not have enough supply of food and oxygen but the tour managers supported well.
Finally he said it was a memorable trip that taught him many lessons about life, risk and management of situations and circumstances. He was beaming with confidence.
After this discussion with him I compared his experience with an investor in equity market and I realised there was hardly any difference in the overall experience.
The mistake is always pointed towards the equity market saying it is risky, volatile, uncertain and unpredictable without introspection. Before investing in equity (stocks or mutual funds) it requires preparation (identifying goals, setting return expectations, duration of staying invested), conducting research (both fundamental and technical), seeking expert advice (a good stockbroker, financial advisor), managing risk instead of trying to avoid it, whether to directly buy into stocks or take the mutual fund route (investing along with other people with similar objectives), be prepared for extreme market circumstances (extended bearish trends) and so on.
Climbing Mt. Everest is risky which every climber knows beforehand and their success depends on their planning, preparation and mindset. Investing in equity markets too is risky and for being a successful investor it definitely requires planning, preparation and mindset. Instead of blaming stock markets that it is risky, volatile and uncertain, it would be better to prepare well before and after investing and conquer the risk. Risk and success are blood brothers.
The author has written 6 books on investing and personal finance. He has 23 years of experience and 6 years in academics