Taking Too Much Actions In Investing
Start Your SIP in Mutual Funds.
The principle of investing is taking a right action with full conviction. Many investors in equity market are taking too much actions on their investments as they feel the more the actions the more will be reactions/results or returns.
It’s not the specific problem, actually it is a nature which is deeply rooted in Indians that the more hard work we do the more results we will get which is actually a principle of life, it is not necessary that all principles of life will work the same way in investing.
Suppose, if any new retail equity mutual fund investor invested Rs.1 lakh in Jan,2017 and his Rs. 1 Lakh grown to Rs.1.32 Lakhs by end of the year. Then the same investor will think that how is it possible to earn so much without actually doing anything? They feel it’s free money and they will never get such money again and that same investor will either switch to other fund or may redeem and never be able to find the right bottom point ever again as he will keep on waiting for market to fall more and more.
The worst happens when right after investing market falls and the same Rs.1 Lakhs invested comes down to Rs. 80,000. The same investor feels that he made a mistake and he waits for market to recover so that when his capital that he invested gets at PAR he can exit and never invest again.
Now, what all this is happening around with most of the investors? Isn’t it thinking too much and taking too much actions in Investing?
Well, as I said the principle is to take the right action with full conviction and have a lot of patience because Patience is a key to successful investing, Patience is the key to compound wealth for decades. Those who take too much action loses the power of compounding over long term.
Remember, Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.”
Over the period of 20 years the average equity mutual funds have grown 80 to 100 times of their invested capital, but the person who actually earned it are hardly 1% of the total unitholders in such mutual funds, majority are those who either died or who forgotten about investments made in such mutual funds because they invested very negligible amount 20 years back.
Equity Mutual Funds grown 80 to 100 times but investors of these funds didn’t made money because of too much action, they missed power of compounding and didn’t followed the investing principle of taking right action with conviction. The one who follows the principle of investing can only compound wealth in long term.
Note: Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing. I’m not considering investors as a whole, I’m talking about specific set of investors who are victim of Action Bias and who think the same way as I mentioned above in this post.
Hi, I’m Managing Director at Gurpreet Saluja Financial Services where I help my investors to invest in mutual funds and achieve their financial goals. I’m also a Value Investor and here I write about Personal Finance & Investing.
