Making Money Requires Conviction, Not Borrowing: Lessons From Vikas Khemani

Khemani began by distinguishing conviction from bias, two ideas often confused in the world of investing. “Conviction is faith grounded in knowledge,” he said, while bias is blind belief.“Conviction requires deep work, but it doesn’t guarantee you’ll always be right. What matters is the discipline to reassess when fundamentals shift and to stay put when they don’t.”

This, he said, applies not only to stock markets but also to careers. Constantly hopping jobs in search of quick rewards often disrupts compounding, while long-term commitment rooted in conviction allows investments to mature.

The Cost of Borrowed Conviction

Khemani's earliest lessons came from personal experience. As a young investor handling his father’s money, he lost a significant sum because he acted on half-knowledge. “You can never make money out of borrowed conviction,” he reflected. That realisation became a lifelong principle.Borrowed conviction manifests in several common investor mistakes, Khemani noted.

First is reliance on tips, which is a habit that prevents people from developing their own understanding. Second is lack of knowledge where individuals without time or expertise for stock selection should channel savings into mutual funds, which have proven their worth by compounding wealth for decades. Third is casual investing where stocks are treated as a hobby rather than a discipline. “If you want to invest directly,” he said, “treat it like a profession. It demands continuous effort and learning.”

Turning Volatility into Opportunity

For Khemani, market volatility is not an enemy but a test of conviction.Citing the example of Aditya Birla Capital, he recalled how temporary uncertainty over tariff, which saw its stock price drop significantly due to external noise like tariff issues that had zero fundamental connection to the NBFC business. If an investor's deep conviction about the business remains sound and no fundamental alteration has occurred, the drop is an opportunity to buy more, provided capital is available. The stock later rebounded quickly within three to four months, proving that panic was unwarranted.

He stressed that the focus should never be on indices or share prices. "Actual investing is about investing in a company and a business". While the index is a broad measurement, good businesses can outperform even when the index is flat or declining, as seen during the 2013-2016 period where sectors like IT and Consumer segments grew substantially. The key job is identifying the right business, management, and entrepreneur.

India: A Decade-Long Growth Trend

Looking ahead, Khemani expressed deep optimism about India’s long-term trajectory, calling it a once-in-a-generation economic transformation similar to the United States in the 1980s. The engines of this transformation, he said, are entrepreneurship, productivity, and a free-market spirit.

India’s strength lies in its balanced economy which is supported by manufacturing and agriculture. Government initiatives are expected to raise manufacturing’s share of GDP from 15-16 per cent to 20-25 per cent. Rising incomes are fueling consumption across aviation, housing and electronics. Infrastructure investment such as new roads, ports, and airports is deepening connectivity and spreading prosperity to smaller towns.

With two-thirds of the people in the working-age bracket, India’s demographics are another advantage. “The hunger for entrepreneurship,” Khemani observed, is spreading beyond metros into Tier-II and Tier-III cities. Financial services is also growing, with investors increasingly exploring portfolio-management services, alternative investment funds, and private equity sectors still in their budding years but poised for growth. Above all, he urged investors to focus on management quality.

Khemani revealed that his shift to entrepreneurship was fueled by the massive opportunity in India, coupled with possessing the necessary knowledge, energy, and adequate capital, making it a choice between corporate comfort/power versus a potentially painful but equally rewarding long-term path.Achieving balance is a journey, and the biggest hurdle is not "not having time," which he labels an excuse. Time is always available for what is prioritised. Good habits, like wealth, improve through compounding over time.

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