Investors Must Play to Their Own Strengths
CEO, Value Research ke. Amateurs achieve their victories by just managing to do the ordinary thing competently and consistently.
The analogy to investing is clear. Great investors hit winners. They generate returns from the unlikeliest of investments because they have the ability to hit winners that others can’t. Moreover, because investing is a closed activity, you will come across many who will hide their losers and talk only the occasional winner that they hit by chance alone. Most of us should ignore all this. We should try and be the consistent amateur and concentrate on not hitting losers.
What does that mean in investing? One of the basic tenets of investing is that avoiding mistakes is more important than making brilliant choices. Many investors, whether they are investing in an equity mutual fund, or choosing stocks to invest in, are obsessed with finding the absolute top-performer. Unfortunately, unless you are a genius and lucky, this doesn’t happen. What does happen is that such investors flit from idea to idea, generally chasing past performance and buying into yesterday’s winners to spot the ultimate winner.
On the other hand, the avoiding losers approach is very different. For mutual fund investors, this involves finding a conservative fund with a good long-term track record and then investing regularly through a SIP for a long (as in years) period. If the period for which you are investing is a short one, this means avoiding equity investing altogether, instead of looking for short-term winners. It means never getting interested in any sectoral or specialised fund, or anything that is flavour of the day. It means not stopping one’s SIPs in response to a market decline or a phase of volatility. It’s much easier to succeed by playing to one’s strengths, than to fail by trying someone else’s.
Investors are forever trying to find out what other, successful investors are doing and then copying that