For
film buffs and critics alike, ‘The Godfather’ embodies what celluloid magic is
all about. Over four decades after its release, the movie continues to capture
the imagination of audiences like no other, reaffirming its status as a
classic.
But
there's a lesser-known aspect of 'The Godfather'. Apart from being a source of
inspiration to aspiring actors and filmmakers, the film has a lot to offer to
investors as well. Following are investment lessons from ‘The Godfather’:
Barzini
is dead. So is Phillip Tattaglia, Moe Greene, Stracci, Cuneo. Today I settled
all family business
A
laser-like focus on objectives and ruthless discipline in their pursuit, are
defining traits of Michael Corleone’s personality. Be it protecting his family
or safeguarding his business interests, Michael is decidedly aware of his goals
and will do whatever it takes—sacrifice his career in the armed forces, join
the ‘family business’ and even eliminate his rivals—to achieve his goals.
Similarly,
investors would do well to set goals before they start investing. Goals can
range from near-term ones such as creating a holiday budget, to long-term goals
like a retirement kitty. Apart from making investing focussed, setting goals
also helps in tracking progress. Thereby deviations (if any) can be easily
rectified. Furthermore, being disciplined (read: curtailing wasteful
expenditure, and investing regularly in line with a plan) will help investors
stay on course to achieve their goals.
Some
people will pay a lot of money for that information; but then your daughter
would lose a father, instead of gaining a husband
Michael,
a fugitive on the run in Sicily, is enamoured by a local girl. When confronted
by her indignant father, Michael calmly reveals his true identity. Also, he
lays out the options available, and the trade-off therein.
Likewise,
while investing in market-linked instruments, investors must be unambiguously
aware of the risk-return trade-off. For instance, a small-cap stock can deliver
substantially higher return versus a large-cap stock; however, the potential
upside comes at a price—higher risk, if the investment doesn’t play out as
expected. Similarly, sector-focused mutual funds can outperform diversified
funds, but they expose investors to higher risk. Hence investors must
accurately understand the risk-return trade-off before making an investment
decision.
Where
does it say that you can't kill a cop?
When
the Corleone family is under attack, Michael comes up with a seemingly
outlandish plan that includes killing a corrupt police officer. His sound
rationale wins over his sceptical associates. Essentially, Michaels’s
willingness to think out-of-the-box wins the day.
At
times, investors can be guilty of being orthodox in their choice of investment
avenues. For example, some invest only in bank fixed deposits and small savings
schemes because of habit rather than choice. By refusing to consider other apt
options, investors run the risk of not meeting their investment goals.
For
instance, an investor in his twenties who is saving for retirement 30 years
hence, shouldn’t hold a portfolio comprised of only fixed deposits and bonds.
Equities and mutual funds must find place therein. Remember, risk in itself
isn't bad; rather, investing without being aware of it, and/or failing to
correctly assess it, gives rise to thorny situations.
It's
not personal. It's strictly business
Every
character quoting this legendary line tries to convey that a given action
should be seen as a business decision i.e. in a dispassionate manner. In other
words, it has nothing to do with personal feelings. The 'not personal' part
holds good for investments as well.
At
times, investors get 'attached' to their investments. This is especially true
of stocks and mutual funds that have had a successful run. The trouble starts
when the investment avenue is no longer equipped to perform as it has in the
past. Then there are misguided investments which fail to deliver, but investors
hold onto them, hoping to ‘get even’.
This
approach to investing is unwarranted. An investment is simply a means to an end
i.e. the investment objective. If a thorough evaluation suggests that the
investment is no longer equipped to play the part that it was supposed to,
investors must salvage the situation by exiting the investment at an opportune
price and time.
Tom
Hagen is no longer consiglieri
While
expanding his operations, Michael sacks his adoptive brother/long-time
associate, Tom Hagen from the post of consiglieri (adviser). Stating that Tom
isn’t a wartime consiglieri, Michael replaces him with someone adept at
strong-arm tactics, since the situation demands it.
Barring
a small section of investors who can manage their own investments, others need
assistance in the form of investment advice. Investors have a variety of
options—distributors, advisers, robo-advisory firms—to choose from. Quality of
investment advice can and does have a bearing on investment results. Hence,
investors must perform rigorous due-diligence before engaging an adviser. Also,
there is a case for reviewing the adviser’s performance at regular time
intervals.
I'll
make him an offer he can't refuse
In
Godfather parlance, this iconic line represents a veiled threat. Refusal to
comply with the offer can lead to dire consequences.
In
the world of investments, there are periods when markets are frothy and
irrational exuberance is the order of the day. In such periods, it is not
uncommon for investors to encounter investment propositions that claim to offer
a win-win proposition. For instance, an investment that offers high return with
virtually no downside. That’s when investors must remember that if the 'offer'
sounds too good to be true, then it probably is.
