My job as an investment adviser, and as a speaker in investment conferences or writing about investing is very difficult and challenging.
What is the challenge?
The challenge is to say the same things again and again without being found out! Seriously good advice is dull, boring, uninspiring, accurate, and creates wealth. However, the market keeps changing. There are new products. Some genuinely good, some completely useless. People still earn money ONLY if they understand the products (Index funds and term insurance do not need much IQ, but need very high EQ), invest regularly, and show emotional maturity and patience.
Writing about the same things is tough too. So when a crypto currency is available, getting people to understand it before they invest is some challenge. It is always necessary to invest time and invest in understanding BEFORE you invest your money (that is easy!). When people say they wan’t or need good advice, what they mean is that they need advice that sounds good. They need to flaunt the ‘new’ today’s advice which is different from the advice that they got when the index was say 20,000 (sensex). See the popular websites devoting lots of columns to crypto currencies! Makes it a great challenge for the adviser to keep his ducks from quacking! Remember the media will GIVE you exactly what you want. The adviser should give you exactly what is good for you. Not easy. Most investors want the holy investment secret – low risk high quality share that they want for the long term BUT with low standard deviation, no falls and a steady rise so that their patience is not tested! It is easy to explain mathematically how such a product CANNOT EXIST. Just cannot. Saving the investor from himself is not an easy task. He continues to be his biggest enemy. People with extremely high intelligence and EQ create a lot of wealth for themselves. Then at the bottom of the pyramid there are people who can be forced to stay on in funds for long periods of time. However, it is the middle level investor who with his ‘asset allocation mis-strategies’, who burns through his portfolio by ‘style jumping’ because he read something somewhere and understood it partially. The more frequently you receive updates about your portfolio, the more damage you are capable of doing to your portfolio. A trader who sits on the terminal can “see” trends where none exists. Its tough not to get carried away when you are sitting in the midst of frenetic activity. I used to be in the ‘ring’ of the Bombay Stock Exchange. Hardly the best place to think and use strategies.
I have invested in direct equity and have benefited from years of ‘doing nothing’. It is important for good investing that an investor has a demanding, time consuming, full time job. I also find that dealing through a human broker instead of an online trading platform helps you remain calm while executing trades. Your swings are better controlled. You book profits in some trades, you let some trades run. A sensible person at the end of a phone call is very useful.
I have seen ‘Reversion to Mean’ work, and I also learnt that companies with high energy, high intelligence, and high integrity create wealth for you in the long run. As Buffett says without integrity intelligence and energy are useless.
I have seen the virtues of regular monitoring and infrequent interventions paying huge dividends. I have seen how difficult it is to ask a person to invest in a ‘Bluechip’ fund which has given “ONLY” 16% vs investing in a ‘Midcap’ fund which has given 29% in the same time period. You know the dividends are 4/5 years away. Or changing weightage in a portfolio BECAUSE the lesser standard deviation portfolio will still meet the objective! This of course has NOTHING to do with what the market is doing today or will do tomorrow.
You need to push back when they want you to do a bad trade. Yes some people will find it boring.
As long as it makes money for the client aka reader in the long run, that’s the way to go!
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