Some more Investment Myths

I was talking to a TV anchor / editor and asked her..why don’t you do programs like ‘bursting the Investing myths’ and I got a blunt answer – ‘cannot get enough sponsors’. The truth is people SAY that they want serious television, but WATCH porn. So the best way for a media looking for readership is to do articles like ‘shares that will double in a year’ or ‘hot Realty companies for 2017’ or ‘sure ten baggers’.

My personal experience has also been the same. Serious ones like explaining Sir John Templeton’s – Success axioms for Investing – saw no readership. Actually I am happy. I do not plan to do articles like ‘what is a mutual fund’ anyway. There are enough base level blogs which will do all that. I am planning to be in the intermediate stage – I may go up and down once in a while, but I do not wish to be overly intellectual or too basic.

So here are some more Investment myths – I daresay that I may have said this earlier.

  1. YOU DO NOT NEED BEAT THE MARKET: If you earn well, spend sensibly, do #GoalBasedInvesting sensibly, put risk measures in place and largely look for a 70% equity and 30% debt portfolio, you should do well in life. Sadly for most investors aiming for alpha, joining ‘ how to invest’ groups, etc. becomes an obsession. Investing becomes an adventure sport and not an activity to reach a goal. Just like eating. To survive you need daal chaval, but the brain seeks ‘variety’. I am sure the lion does not decide whether to have zebra meat or giraffe meat in the morning before going out on a hunt. Indexing is the daal chaval of investing.
  2. YOU CANNOT COPY A BUFFETT OR AMBANI OR RAKESH JHUNJHUNWALA: To copy someone you need to be very close to them, and learn from them. It is impossible to read a book or a blog post and pretend that you can invest like them. For e.g. Raghav Behl did not come to you and me asking for Rs. 4000 crores as a bail out, did he? So will he give you the price and terms and conditions that he gave to Mukesh Ambani? Are you kidding? I know big investors who can place large chunks of their own money in DEBT INSTRUMENTS issued by finance companies. These are well structured deals which I can just see and can have no access to unless I am willing to invest 5 million rupees per deal. So big people get great deals, we can only read about it in newspapers and blogs. So, stop pretending. Learn from them, yes, but copying them not possible.
  3. ACTIVE INVESTING IS A NECESSITY: I can get you some very smart people who can talk hours about alpha, beta, etc. and are under performing the index. There is no guarantee that if you pay fees you will get good stuff. Oops. The financial markets do not come with a ‘higher the price better the product’. It is not so. Going to a big branded shop you are almost guaranteed that the buttons won’t come off, the shoe heel will not break – at least the basics. IN the financial market there are no guarantees. The only thing guaranteed is cost. If you want to avoid costs, you can index or you can go to ETF – even better than an index fund.
  4. INVESTMENTS DO NOT NEED A SYSTEM: many people who invest do it on an ad hoc or haphazard way. May have worked for a few lucky ones. You actually need an Investment Plan, an Investment Philosophy statement, an Investment diary, Investment rules – WRITTEN DOWN. You can break the rules, but at least YOU should know that these 2/3 investments are AGAINST the rules. So in a crisis you know that these shares should be sold – they were born without a plan right? they can die without one too.

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4 Responses to “Some more Investment Myths”

  1. subra sir

    i am a great fan of yours. but with regard to your views on indexing though , i am confused. sometimes you say indexing is better and in some other articles you say like “As long as Prashant Jain, Naren Sankaran, Nagnath, Sukumar are managing funds for me for a 2% fee why should I ‘index’ my portfolio”. you also said in the response section “So indexing does NOT MAKE SENSE FOR ME. ‘Indexing’ is an American concept”

    i am thoroughly confused. can you kindly clarify

  2. srinivas If you know how to pick funds which are well managed – and I am not saying that these fund managers are the only ones who can do this, or that these fund managers are invincible…it is just that it suits me. I do think over the next 10 years the gap between a large cap ETF and a managed fund will tend to be near NIL

  3. @ Srinivas,

    Happy to know that you are confused.

    Order from chaos!

    Take your time. Indulge in investing.
    Real stuff will mature with time…
    Get Enlightened!

  4. Do not believe any post on this blog could go without readership whether Sir Templeton related or otherwise. The addicts at this site just can not afford to miss any post.

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