We often get caught up in anecdotes of people who got rich because their parents or grandparents had bought shares of Hindustan Unilever, HDFC, etc, because that small investment has now grown into a nice little nest egg.
Then we start to regret the fact that our parents did not start investing in the stock market a few decades ago instead of sticking to FDs, as that would have provided us with retirement money.
In reality, it would have helped us far less than we think!
This was brought home to me recently when a client shared his mother's portfolio that had remained nearly untouched for 20 years and what did I find there: no HUL, no HDFC Bank, not even an ITC...instead there were DSQ Software, Silverline Technologies, NEPC Micon, etc.
You may say these are purchases during a particular boom but the issue is not as narrow as that.
Even the Sensex companies of decades ago were weighted towards textiles, shipping, paper & pulp, old car companies etc.
Scindia Steamships, Hindustan Motors, Ballarpur Paper, Zenith, etc were the blue chips of the day that our parents would have likely bought had they been in the stock market then - that have largely faded into oblivion.
Most examples of the great returns from 'buy and forget' suffer from Survivorship Bias.
Of course, that isn't the only place where Survivorship bias misleads us - but more on that another time.
From the desk of Devina Mehra
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