Making investments on your own or hiring fund managers? What makes more sense for you?
What it takes to beat a mutual fund manager?
Investing well, without losing money, is not just some random activity. There are over 5,000 listed companies in India, and the top 250 companies represent over 80% of the market value. The remaining 4,500+ are all small companies whose business prospects fluctuate a lot. This extreme up and down fluctuation in the share prices of small companies is what generates excitement and greed in an emotional roller-coaster. Daily spam SMS text messages from unknown brokers do not help.
So what should you do?
If you have a job from Monday to Friday, stop wasting time dabbling in investing directly. Go through a professional fund manager – usually, he or she works at a mutual fund. You trust trained professionals in other spheres of your life, do that with your money too.
Exercise / do yoga/ run marathons to build the mental resilience and fortitude that is absolutely needed to stay steady through up and down market cycles. Share prices do not go up in a straight line and there will be many periods where your conviction will be tested. You need to stay healthy to stay invested for the long-haul and benefit from compounding.
Ultimately you need to clearly understand what you’re good at, and what you’re not (your “circle of competence”). Focus on what you’re good at and outsource the rest to trained professionals – be it a doctor, a lawyer, a gym instructor or mutual fund manager. Focus your time on making more and saving more, both of which are under your control. Just because you can, doesn’t mean you should.