Diversification: Is the Stock Market similar to arranged Marriages?

All eggs in one basket

Marriage — an option without a future and a future without an option!

“Any portfolio must be diversified in order to mitigate the risks and maximize the returns”. This is a well known statement..should society give it a thought to apply this logic to marriages also?

Is stock market is similar to arranged marriages

All eggs in one basket

Diversify to avoid DIVORSE-ification!!

Imagine a hypothetical situation where the world starts believing that diversification leads to a riskfree married life. A small portion of investment in a simple “safe” guy – like the government T-bills, another in a fun loving carefree guy like a volatile FX Option, and some portion in a spoilt hot guy i.e. emerging market “penny stock”…but the problem is that fund manager in the Indian context is always the Mother, never going high on risks and diversification.
Arrange marriages are like technical analysis. You go by the past trend and take a call on the future. Love marriages give the time for two individuals to understand each other and take a call based on Fundamentals. Both have their pros and cons and none of the two can give you guaranteed returns.

Trading Account

Husband-An asset or a Liability??

When we are saying all these, we are making an assumption that husband is an Asset. Is a husband really an asset? He is more like an Equity than like a debt that can be leveraged. The portfolio manager is going to dupe you by saying that it is an intangible asset that will appreciate year on year, but if you ask the experts who have invested life and lost the game they will show you how it depreciates with time. Even the economists can testify this using the Law of Diminishing Marginal utility. Some infact say that all assets become NPAs few years after marriage and thus one must have some provision (acceptance in the heart) to handle the Bad debts!!

So now we happen to understand that everyone faces a risk return tradeoff in life. Either invest all your income in a Fixed deposit that is extremely safe and briarranged marriagengs hardly any returns that cannot even match the inflation levels(read happiness is lesser than frustration), or DIVERSIFY(read remain single and always ready to mingle). It all sounds so unethical and loose now, simply because our ancestors never thought of this. Imagine if they would have applied laws of economics at the inception of the concept of marriage then the husbands would not have got a monopoly in their family.

May the best Man win!!

Talking about Monopoly, they say that Monopolistic market is the worst form of market. For the best outcomes and maximum customer benefit, PERFECT COMPETITION works best. This is exactly the reason why before marriage, the girl is very happy, all the guys interested in her are at their best and nice behavior. Remember the rule of perfect competition? Price drop in one leads to others following suite.

All this sounds good and logical on paper but since we live in India where people are not very Risk Averse, ultimately the best move is to invest in one safe security, gain small returns and remain satisfied with that(don’t expect the interest rates to shoot). The more we want, the less we will get, so I conclude with a disclaimer saying that:

“Marriages are subject to market risks, please read the offer document carefully before Investing” 

Also Read How Psychology affects Trading

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