“Dil bhi ek zidd pe aḍā hai kisī bachche kī tarah
Yā to sab kuchh hī ise chāhiye; yā kuchh bhī nahīñ”
“The heart too is stubborn like a child;
it either wants everything, or nothing at all.”
The legendary singer and “Ghazal King”, Jagjit Singh, once sang this verse, which beautifully compares the emotional intensity of the heart to the stubborn innocence of a child. Just like a child who throws a tantrum when they do not get exactly what they want; no compromises; no half-measures; the heart, in matters of love or desire, behaves the same. His soulful voice cemented the couplet’s place in the hearts of ghazal enthusiasts and made it a timeless piece that continues to touch souls.
However, when it comes to equity investing, “all or nothing” may not be the best approach.
#1 All or Nothing: The Pitfalls of Binary Thinking
We often get swayed by emotions, headlines, or past performance, which leads us to take extreme positions. We either go “all in” when the market feels hot or redeem everything when fear dominates. Both approaches are risky because they fail to account for uncertainty and ignore the range of possible outcomes.
Suppose we believe that markets may fall in the short term due to global uncertainty. Should we pull out all our investments and wait? That would mean betting on a single outcome; essentially saying we are 100% sure of what will happen. But what if the markets move in the opposite direction?
Rather than making binary decisions, we should think in terms of ranges and probabilities. If we believe there is an 80% chance the market will fall and a 20% chance it will rise, we should adjust our portfolio moderately; not fully exit or enter. This allows us to stay in the game while managing risk.
Investing is not about being right all the time. It is about being roughly right more often than we are wrong; and managing our portfolio such that even our wrong calls do not cause irreversible damage.
#2 There Are No Guarantees; Only Probabilities
Equity markets are influenced by countless variables; macroeconomic indicators, global events, corporate earnings, investor sentiment, government policies, and more. No one can predict all these with 100% accuracy. Therefore, rather than asking “Will this investment do well?”, the smarter question is “What is the probability this investment will do well over our investment horizon?”
We want clear answers; black-and-white decisions: “Should we buy this stock or not?” “Is the market going up or down?” “Will this fund outperform next year?” But the reality is; investing is not about certainty; it is about probability. The sooner we embrace this mindset, the better our decisions and outcomes are likely to be.
#3 Position Sizing: Managing Uncertainty with Discipline
Another principle closely tied to thinking in probabilities is position sizing; how much of our portfolio we allocate to a particular idea or asset class. Even if we are highly confident about a stock or theme, putting too much into a single bet can be disastrous if things do not go our way.
Think of this like playing a game of poker. A skilled player never bets their entire pile on one hand, no matter how good it looks. Why? Because no hand is a guaranteed win; and once we are out of chips, we are out of the game.
Similarly, in investing, if we go “all in” and the investment turns against us, not only do we suffer financial loss, but we also lose the emotional ability to stay invested and recover. Diversification, asset allocation, and staggered investments (like SIPs) help us keep skin in the game while managing the risk of being wrong.
#4 Shifting Gears: Calibrating Portfolio Aggressiveness
A key factor that increases our probability of success in equity investing is our time horizon. Equity markets are volatile in the short term; but over longer periods they tend to reward investors with higher returns than most other asset classes. This means, if our financial goal is 15 years away (like retirement or funding our child’s college education), we can afford to take more aggressive positions in equities. We have time on our side to ride out the volatility and benefit from compounding.
However, it is also critical to be mindful as our goal date approaches. For example, if we are just two years away from needing funds for a home purchase or our child’s education, we should start shifting a portion of our equity investments to more conservative instruments like debt or hybrid funds, or fixed deposits. The idea is to de-risk our portfolio gradually as the financial goal nears; improving the probability that our money will be available when we need it; without being subject to last-minute market swings.
#5 Do Investing for Durability, Not Certainty
Rather than trying to predict every market move, our objective should be to build a portfolio that is durable across different scenarios. This means:
• Diversifying across asset classes
• Allocating more to equities for long-term goals and gradually reducing risk as goals near
• Not reacting to short-term noise with extreme decisions
• Investing regularly through SIPs to average out market volatility
• Having an emergency fund and insurance to avoid panic-selling in a crisis
This approach increases the odds of long-term success while minimizing the chances of catastrophic failure.
Conclusion: Savvy Investors Bet on Odds; Not Guarantees
Investing in equities can be immensely rewarding, but it comes with its share of uncertainties. The key is not to eliminate uncertainty; it is to respect it. By thinking in probabilities rather than absolutes, we prepare ourselves to deal with a wide range of possible outcomes. We must avoid the temptation to make extreme, binary decisions. We must use time, diversification, and discipline to our advantage. The winners in investing are not those who chase certainty, but those who think clearly, act with humility, and stay the course when it matters most.
Manuj Jain is a CFA charterholder and co-founder at ValueMetrics Technologies.