Swami was worried last evening. I realized it by seeing the way he walked into the cafe.
“The next few months are going to be bad for the markets,” he said. “But I think it is a good time to buy mid-cap stocks now for my retirement corpus.”
Jigneshbhai was unperturbed sipping his coffee, neglecting whatever Swami said altogether.
“When I was 20, I realized that I was overweight,” he said.
Nothing irritates Swami more than this neglect.
“I am asking you something much more important. I want to know if I should buy midcap stocks for retirement, now that the market is down. Did you hear me?” Swami asked.
Jigneshbhai neglected Swami yet again.
“For years, I thought more exercise would reduce weight. It didn’t,” he said.
It left Swami non-plussed. Here Swami was jumping around about the markets, and Jigneshbhai was explaining why exercise doesn’t matter for weight loss.
“Has he gone crazy?” Swami asked me, trying to spur our friend. “Why is he talking about weight loss when I am asking him about midcap stocks? What’s wrong with him?”
Jigneshbhai had a faint smile on his lips.
“Yes, it took me a long time to understand what matters for weight loss,” Jigneshbhai said.
Now this was getting on my nerves too. Swami had gone beyond the phase of getting irritated.
“We know all this, right? Why is he telling this to us again?” he asked me. Before I could answer, Jigneshbhai had one ready.
“Wrong correlation,” he said. “That you need exercise to reduce weight is the wrong correlation,” he continued.
“In all honesty, to reduce weight, exercise is irrelevant, mostly. Because only food matters,” he said, and finally turned his smile towards Swami.
“Buying the right midcap won’t build your retirement. Asset allocation will.”
Now, Swami’s eyes lit up. But not in agreement. “What nonsense!” he claimed. “Midcaps grow faster than the index over the long term.”
Jigneshbhai’s smile didn’t budge even a bit.
“Exercise has many other advantages,” he started much to Swami’s irritation. “But no – exercise is not strictly necessary to reduce weight,” he asserted. “Midcaps aren’t necessary for retirement, though they may help.”
He continued smiling while Swami continued getting irritated.
“So, if you obsess over exercise to reduce weight, and do nothing to your food, you are looking at the wrong correlation,” Jigneshbhai concluded.
Swami put his coffee cup on the table with a bang and frowned. “So midcaps don’t matter?”
Jigneshbhai smiled. “They do.”
He took a sip of his coffee.
“Just not as much as you think.”
***
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