Dear Reader,

One of the quiet pleasures of the work we do, is the range of questions people bring us, especially when retirement is on the horizon. Two of them turn up often, but it’s the contrast between them that makes it interesting.

At one end is the person who wants to play it absolutely safe. They have been cautious savers and quite averse to even temporary dips, so they hold most of their savings in fixed deposits and the like. At the other end is the person who wants returns and growth first. Retirement, to them, is the time they are finally free enough to be active and adventurous in the markets and back their own judgement.

One has spent a lifetime avoiding risk, the other is preparing to walk into it. Yet, more often than not both are about to make the same mistake, but from opposite directions.

The safe one is quietly losing money.

The safety focused saver first. Theirs wasn’t such a bad strategy up until the end of the 2000s when deposit rates went down from 11% to close to 7 % today. This means over 10 years and at 11% your money used to almost triple in value. At current rates, it doesn’t even double.  At the same time, the cost of the life the savings were meant to fund have gone up. 

While the money has stability and security, it still shrinks year after year. Nothing looks like it’s going wrong, but everything slowly is. 

The bold one is entering the arena of machines and institutions.

Now let’s get to the bold ones. I wrote recently about the scale of what Indians are losing to speculation in the derivatives market. The sum is a staggering ₹91,685 Cr. It’s more than roughly three months of the country’s equity mutual fund SIP contributions!

This is no reflection on their intelligence. Look up Leopold Aschenbrenner, a former OpenAI researcher who understood the technology as well as almost anyone and built a fund on that conviction. He was right about AI. Yet earlier this year, leverage on his holdings triggered a margin call that wiped most of them out. 

He had the insight and still lost most of his winnings by the way he bet on it. This kind of market is built for institutions and algorithms, and the individual, however sharp, is usually on the wrong side of the trade. 

Even if you just want to pick stocks and not dabble in F&O, the odds are usually against you, especially at this stage. To try this route with your retirement savings in the most important years of your financial life is to expose your hard earned savings to completely unnecessary risk.

What is my answer to both?

Both are making a single undiversified bet. One is staking everything on safety, while the other is staking it all on being right, almost every time.My answer to both is diversification, and I don’t mean the textbook version. My focus is on something simpler and much more human. 

The saver who dreads risk does not need to be brave with everything. If keeping a chunk genuinely safe is what lets them sleep, wonderful, but the rest can do the patient, long-term work that actually protects them from inflation across a retirement that may run 30 years or more.

For the other one itching to trade, they don’t need to bet the whole house to scratch that itch. A portion they can afford to lose kept apart lets them play the game, if they desire. The serious money stays separate and does the heavy lifting in the form of a diversified portfolio.

Rather than change themselves completely, both have to simply stop letting their nature run the whole portfolio.

The hard part is seeing it in yourself.

All of this isn’t easy to see from the inside. Our own temperament is usually the last thing we notice.

So whichever end of the table you sit at, the question is the same. Have you given each part of your money the job it is actually suited for?

With regards, 

Atul Shinghal 

CEO and Founder, Scripbox

P.S. The right split is a personal thing, and it depends entirely on you. But it is among the most useful conversations we have, and we would be glad to have it.