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Last Updated : Nov 10, 2018 10:18 AM IST | Source:

Market investment: Do we control the outcome or does it control us?

You don’t need large wealth to create wealth, you simply need focus and discipline with the money you earn and manage, writes Rahul Jain of Edelweiss

Moneycontrol Contributor @moneycontrolcom

Rahul Jain

Last week, I finally caught up on the ‘Art of Thinking Clearly’ by Rolf Dobelli. I had been procrastinating over the book for a while now and on completing it, I wish I had done it sooner. Throughout the book, the author covers the most common errors in judgement that people make and simple ways to avoid them.

We often invest excessive time effort in something, which in hindsight doesn’t seem worth it. We take credit for success, but blame failure on external elements.

In one of the chapters the author covers a phenomenon called the outcome bias; where people tend to evaluate decisions based on the result rather than on the decision process. I see it occur almost every day in the stock market; where while picking a stock, people are so fixated over the returns, that they skip through their basic investing checklist. They fail to look at the company’s financial statements; the industry, the management track-record and most importantly the prospects of growth.

Additionally, when it comes to investing their capital, people are in imminent haste to see it manifold with time. In the words of Warren Buffet – ‘No matter how great the talent or efforts, some things just take time - you can’t produce a baby in one month by getting 9 women pregnant’.

Last week, I chanced upon meeting an old client of mine, who worked with the army. He told me that he started investing in mutual funds with a sum of Rs 5,000, way back in 1997 (back then the industry was still in its nascent stage). As time progressed, he spread out his investments into some blue-chip stocks but never did the investment amount exceed more than Rs 20,000 a month. He retired a few months back, with a neat corpus of Rs 3 crore; the wealth he solely created by investing in mutual funds and some equity stocks.

Mind you, the gentleman was no stock market wizard – just a diligent investor, who regularly placed a part of his corpus in investment instruments and saw his returns gradually grow with time. He, as Rolf Dobelli put it, did not base actions on the outcome but based his decisions on the fact that money invested smartly will multiply with time.

I truly believe that investing and finance is not as complicated as it is made out to be.

You don’t need large wealth to create wealth, you simply need focus and discipline with the money you earn and manage. If you manage to control these two aspects then you need not control the outcome; even investing Rs 500 every month will help you generate a steady corpus over time!

The author is Head, Personal Wealth Advisory at Edelweiss.
First Published on Nov 10, 2018 09:36 am
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