When we are children we know what we know and what we do not know. We readily admit that we do not know. We even admit that we do not understand. We ask our teachers when we do not understand.

However, when we reach about 7-8 years of age, we start behaving like adults…and get some of the characteristics of adults.

So we start investing. Or dieting. Or joining a gym.

Remember all these are difficult to do, and in most cases we need a guide/ a professional who knows how to do it.

Either we should put in the efforts and learn. No. That is not so difficult. Or we should go to a professional. Or in case of investing do a SIP in an index fund. Once you start investing in an index fund you are likely to find some other funds doing better than the index fund. Of course this will happen. If that makes you feel bad, its really your bad luck. At this stage you will start believing that your investment skills are the combined prowess of Prashant Jain, Vallabh Bhansali and say Warren Buffett. In fact there is no evidence either way, right?

Then they start investing. They even make money. If they are already well off and are putting say 5% of their money into equities, how well they do does not seem to matter. It is a small amount and it is now more fun than a serious money making / life altering investment that they are doing.

Then one day somebody tells them “you need to calculate your IRR”.

Mostly they ignore that advice. Some of them do calculate their IRR. Realisation dawns. Hits hard.

They are earning less than their PPF account. Sometimes even worse. They are earning less than their savings bank account over a long period of time. They have actually destroyed wealth. For themselves, their families, their friends(?).

Then they realize an old English saying “A little knowledge is a dangerous thing”. How a 6 month old kid will not be worried going near a lion, right? She knows how to crawl but does not know that she should not crawl and fall into a swimming pool.

You must read Zewig’s book on Investing: “Your Money and your Brain”. Your brain lies to you. Exactly you think you exercise a lot and eat less. The mind exaggerates the exercise and downplays the eating. Excel sheets tell you the truth. So you read the book and accept that “you are smarter than the average guy” is a stupid mind thought. Wrong perhaps, but so what. Lol.

Most of us believe we are smarter, better looking, better drivers….when compared to the average investor, right?

Well accept that Warren Buffett is the ONLY person who has achieved that kinda amazing results. You need to be a jew, born in USA, have rich/very rich parents, obsessed about JUST MONEY, read, be intelligent, have the resolve of a Mahatma Gandhi, …and be rich to start off!

I have done posts saying why you cannot invest like WB – do read them.

The fact that we think we can invest like WB is overconfidence.