The household does a review every April, and it is a genuinely good one. The funds are listed with their values, the shares with theirs, the deposit with its maturity date, and somebody works out what fraction is in equity. The review takes an evening and it has caught real things over the years — a folio in the wrong plan, a fund that had drifted, a nominee never registered. What it has never once covered is the plot on the edge of town, bought in 2015 for ₹18,00,000, which is the largest single thing the household owns apart from the flat it lives in. Nobody excluded it. The sheet has a column headed current value, and in eleven Aprils there has never been a figure to put in that column, so the row was quietly dropped in about the third year and nobody has missed it since.
Two people put on the same nine kilos over four years. One of them owns a bathroom scale and stands on it most weeks; the other does not. Only one of them does anything about it, and it is not because their bodies behaved differently. The scale did not cause the gain and did not prevent it. What it did was make the change into an event, and an event is the only thing that ever prompts anybody to act.
A listed holding is weighed every few seconds and the number is pushed at you. A plot, a policy nobody has asked the surrender value of, or shares in the unlisted company you work for have never been weighed at all. The second kind is not steadier than the first. It is unobserved, and the absence of a red day is being read as the absence of a fall.
The three jobs a price does, and what happens when there is none
To mark to market is simply to restate a holding at what somebody would pay for it today rather than at what you paid for it. It sounds like an accounting formality. It is in fact doing three separate jobs for you at once, and only the first is the obvious one.
- It tells you what the thing is worth, which is the job everybody notices and the least important of the three.
- It generates an event. A fall is a thing that happens, on a date, and it arrives whether or not you asked. Reviews are almost never scheduled into existence; they are provoked. Nothing about an unpriced holding ever provokes anything, so the review never starts.
- It makes the holding commensurable. A number in rupees can be added to other numbers in rupees, which is the only way an asset can be part of an allocation, a total or a plan. Without it the holding cannot be included in any sum, and so it is excluded from every sum.
| How often it is priced | What you own that behaves this way | What actually triggers a review |
|---|---|---|
| Continuously | Listed shares, exchange-traded funds | A fall large enough to notice, arriving unrequested. In practice, far more reviews than the holding needs |
| Once a day | Mutual fund units, through the net asset value | A monthly statement and a bad quarter. Enough to keep the holding inside the annual review |
| Occasionally, on request | A traditional insurance policy with a surrender value; a flat, through a bank’s panel valuer; unlisted shares, through the last funding round | Nothing at all, until somebody asks. The number exists and has to be sent for, which is a different problem from not existing |
| Effectively never | A plot in a layout, a share of ancestral property, gold in a locker, a small stake in a relative’s business | A crisis, a sale, a death or a dispute. All four are bad moments to be forming a first view of what something is worth |
The one side of the ledger that can be measured exactly
Here is the asymmetry that makes an unpriced holding worse than it looks. The value side cannot be known from where the family is sitting. The cost side can be known to the rupee — and is not, because there is no statement on which it would ever have appeared. Every other holding in the house sends a document once a month. This one sends a caretaker.
What is quietly being settled while nobody looks
- The decision to keep it is never taken. To sell you must first form a view on value, and forming one is work with a fee attached. So the default is to hold, for another year, and holding never presents itself as a choice anybody made.
- Nothing ever asks you to justify it. The sunk cost fallacy is usually described as clinging to a visible loss. An unpriced holding removes the loss from view altogether, which does not fix the problem — it makes the correction impossible, because the uncomfortable number that would prompt it never appears.
- It cannot be in the allocation. A holding with no value cannot be added to a total, so the household’s equity share, debt share and everything else are computed across the assets that happen to report themselves. The next lesson but one is about what that does.
- It absorbs whatever job is needed. The plot can be the retirement plan, the backstop if the income stops and the second child’s education at the same time, and no contradiction is ever exposed, because there is no figure to divide between them. A priced asset makes double counting arithmetically visible. An unpriced one does not.
- Its return arrives as an anecdote. The nearby sale that gets quoted is the highest one anybody heard about; the plots that were offered and did not sell are never mentioned, because a non-sale is not news. This is silent evidence operating on a sample of one or two.
- Getting out is a search, not a click. Liquidity risk in a thin smallcap shows up as impact cost — a worse price for your quantity. In a plot it is not a cost so much as an absence: there is no market to sell into, only whichever private buyer is available in the month you need the money, and that month is usually chosen for you.
- Falls are visible, and painful, and therefore acted on.
- The fall itself schedules the review.
- It appears in every total and every allocation.
- Exiting takes a few minutes at a knowable price.
- Its costs arrive on a statement, itemised.
- Falls are invisible, and painless, and therefore not acted on.
- Nothing schedules a review, so none happens.
- It appears in no total, so the totals are wrong.
- Exiting takes months and begins with finding a buyer.
- Its costs arrive as errands, and are never added up.
- 1Ask for the number that already exists
A surrender value quote from the insurer. A panel valuer for a flat or a plot. The last funding round and its date for unlisted shares. The registered transactions in the same layout, with the differences from yours written down beside them. None of this is a market price and all of it is better than a blank cell.
- 2Write down who produced the number and what they were valuing it for
This is the step that keeps you honest, because every one of these figures has a direction built into it. A circle rate is produced to collect duty. A bank’s valuation is produced to lend against the asset and is deliberately unadventurous. An agent’s estimate is produced to win your listing and points the other way. Label the cell with its source, and the number stops being able to pretend it is a price.
- 3Add the year’s carrying costs to a line that exists
Tax, upkeep, the caretaker, the trips, the premium. One line per year, in the same file as everything else. Eleven separate ₹31,200 payments are invisible and ₹3,43,200 is not, and the difference between those two facts is entirely a matter of where they were written.
- 4Then ask the question you cannot ask before the number exists
Another lesson in this track puts it as: if I held none of this, would I buy it today at this price. That question is unavailable to an unpriced holding, because it has no price to insert into it. Which is the whole reason the first three steps are worth an afternoon.
- 5Put the next review in the calendar, because nothing else will
A priced holding is reviewed by its own bad days. This one has no bad days, so the only mechanism available is a date. Attach it to the April review that already happens rather than inventing a new ritual for it.
It is April and the plot is not on the sheet
You are doing the annual review. The funds, the shares and the deposit all have values. The plot, bought in 2015 for ₹18,00,000, has no row. Somebody points this out for the first time in years.
Last year the household’s listed portfolio fell 22 per cent, while "the plot did not move". What is the most accurate reading of that comparison?
Har April ko review hoti hai: fund, share, FD — sabka current value likha jaata hai. Par 2015 mein liya hua plot (₹18,00,000) us sheet pe nahi hai. Kisi ne hataya nahi — column "current value" ka hai aur us column mein daalne ke liye kabhi koi number aaya hi nahi, toh teesre saal woh row chup-chaap gir gayi. Bhaav na dikhna ka matlab bhaav na hilna nahi hai; matlab hai kisi ne naapa hi nahi. Ab jo cheez pakki naapi ja sakti thi, wahi dekho: registry ₹1,26,000, municipal tax ₹4,200 × 11 = ₹46,200, chowkidar ₹1,500 mahina = ₹1,98,000, boundary wall ₹40,000, saal mein do chakkar ₹9,000 × 11 = ₹99,000 — kul ₹5,09,200, jo kisi statement pe kabhi nahi chhapa. Aur agar 11% saalana ka paimana rakho, toh plot aaj kareeb ₹65.8 lakh ka hona chahiye (₹18 lakh gyarah saal mein ₹56.7 lakh, aur ₹5.09 lakh ke kharche ka lagbhag ₹9 lakh). Ghar mein sab kehte hain "₹45 lakh ka hai, chaar gali chhod ke waisa hi bika tha". Woh bhaav nahi, kahani hai — aur circle rate bhi bhaav nahi, woh stamp duty ke liye sarkari farsh hai. Baat yeh nahi ki plot bura tha; baat yeh hai ki gyarah saal se ghar ki sabse badi cheez ka na kharcha ginaa gaya na keemat pata. Ilaaj sasta hai: ek valuation karwao, uske saath likho kisne diya aur kis kaam ke liye, kharcha ek line mein jodo, aur agli tareekh calendar mein daal do — kyunki jiska bura din aata hi nahi, uski review apne aap kabhi shuru nahi hoti.
- A price does three jobs: it values the asset, it generates the event that provokes a review, and it lets the holding be added to a total.
- An unpriced holding is not a steadier one. It is an unobserved one, and no red day is not the same as no fall.
- Most "unpriceable" assets have a number that must be sent for — a surrender value, a panel valuer, a last round.
- The carrying cost is the one side that can be known to the rupee, and it is missed because no statement carries it.
- Nothing will schedule the review of an asset with no bad days, so the review has to be a date in the calendar.
Mark it done to track your progress through the curriculum.