Some of the worst investors you can meet are the doctors, scientists, top executives, rank holding CAs, over educated IIT, IIM graduates,….you know why?

Simply because they have heard of some outlier events and think all of the incidents are about to lead them there.

Some of the BEST investors I have met are doctors, scientists, rank holding CAs, IIT graduates, IIM grads…..you know why?

they outsource investing to others and sit tight over same funds for a couple of decades.

I meet both category of people and now get amused seeing them. So you can go to a professor and say ‘we will give you all the data in one place so please shift your portfolio to us’. Actually the person choosing the fund is far, far, far more important than a person who has the aggregating software. However, the prof who does not know her ankle from her forehead will happily shift her porftolio.

Or the IIT, IIM graduate will argue endlessly about whether one should invest in a fund tracking Sensex or the Nifty. Telling her that the correlation is almost 1 does not help. She will sit with her bank deposits for 10 years without doing anything. S…g up all the chances of compounding. Paying taxes in the meanwhile.

Or the rank holding CA who will say “Subra but when we went to place funds with XYZ fund the fund manager asked money for buying our bonds” – THEREFORE implying that all mutual funds are dishonest and about to rip her apart. Tell her about another fund, another asset class, or …..the basic ‘suspecting CA’ remains sceptical all her investing life.

Can go on and on.

The other problem is that they will have some amazing black swan event or strategy which hurt a company or MADE a company. So they will keep talking about Kodak not changing to digital photography, or Worldcom doing poor accounting. Ask them to invest in a mutual fund – and they will tell you ‘the future is in ETF’. And their money will be sleeping in the bank.

When a bowler bats in one match we say “he is the next Kapil Dev” or when a batsmen takes a great catch we are willing to call him the “best fielder” or when a guy scores a big ‘hundred’ in a match we are willing to say “the next Sunil Gavaskar”. We are in a hurry – and in investing if you have a lot you are willing to drop names like ‘Tulip Mania’ or ‘again 1929’ or ‘the next subprime crisis’ or…..we forget that ‘1929’ had too many things going aginst it. We are quick to draw conclusions.

During all this period if the ‘analyzer’ just sat in a few mutual fund schemes chosen by a good adviser, money would get built well. Being able to see it everyday WILL NOT GROW THE MONEY. They do not have the brain to know that ‘Wealth managers’ have ‘sales targets and AUM targets. However, they pretend like they understand. This rips them apart.

We have an amazing ability to forget the simple ones. Like a friend wanted a list of companies that would make money if Solar power got more popular. Or what would happen if driver less cars became popular. Or…

Why do people forget the BASICS?

• people will buy soap, shampoo and blades
• people will fly by air if the train fares are so close to air fares
• people will use electricity
• people will buy time shares even if you do a 100 articles saying why they should not
• if there are 110 companies doing Mortgages, the bottom 100 will have Npa and wafer thin margins
• markets can be irrational far longer than you can be solvent

stick to simple plans. Do not worry too much about black swan events. YOU do not have the ability to spot it. Many companies have DIED not keeping up with change. Many companies have died trying something new – AIG was killed by derivatives. LTCM was killed by poor liquidity in certain assets. Leveraging rewards, leveraging kills.

Dude, keep it simple. It works.