RETAIN YOUR OBJECTIVITY - IN LIFE AND INVESTING

As a young school kid in primary school I would look towards the high school section, see bigger guys, and wait to grow up and “be like them”. As an executive in a company you want to grow to be a manager. As a manager, one wants to get into higher management. A businessman wants to increase turnover and profits.  All these are different examples for only ONE thing – the universal human need to grow, expand and feel full and complete.

Wanting to grow, expand and feel full is human nature.

Now come to the world of personal finance and investing. Fitwit has many people people speaking only about themselves, their investments and their success and it is but natural for beginners, newbies and many investors to “be like them” – to grow, get rich, feel complete and successful. For every investor, the means to expand, grow, feel full is to follow a path that takes them to such success. This strong desire to FEEL FULL and NOT FEEL SMALL - is the root of action of every individual.

I am discussing investors and their behaviour. While wanting to be full and complete is natural, what harms is the strong desire to do it fast. This leads to the dulling of discriminative ability.

Think about it – all greed, instinctive decisions, stupid allocation is the result of this wanting to grow fast, quickly. And… the worst thing to happen is to do it by:

• Reading clickbait headlines
• Taking tips, free advice from various media
• Listening to fake folklore of office colleagues, cousins
• Blindly following authoritative figures.

 As an objective individual, it is easy to call out nonsense, but…. this need to grow fast and feel full takes over and we simply lose all objectivity.

 A true story.

 Three years ago, an entrepreneur running an SME came to me to onboard and I discussed with him a scheme of allocation, keeping the overheated market in mind. He pooh poohed the allocation showing data of recent returns of small caps and of individuals on twitter. Disagreeing with his utter disregard of advice and with his misallocation, I did not onboard him and he put directly a large sum in 100% equity, heavily tilted toward mid and small cap funds. We all know what happened since 2017. Greed, fuelled by a desire to be successful, to get rich soon, led him to lose objectivity and to ignore warnings of mis allocation. The story continues…the same investor redeemed everything at a low in March 2020, losing very heavily and has come back for help on asset allocation.

 While one can feel sorry for such misfortune, the one take away we can have from all this – We all want to grow. But growth requires time and the ability to filter out the bulls**t from the truth and choose rightly. In Sanskrit the word Viveka is used for ability to discriminate – crap from reality. Viveka also means you know when you can use help, advice rather than getting it free from gyan. Use this discriminative power and it will help you as an investor and through out life.

 

MUTUAL FUNDS ARE SUBJECT TO MARKET RISK. READ ALL SCHEME RELATED DOCUMENTS CAREFULLY BEFORE INVESTING.

DISCLAIMER: I AM A MUTUAL FUND DISTIRBUTOR