The irony of the stock market is investor return does not equal investment return. This happens because of behavioural aspects. Our buying and selling decisions are dictated by greed and fear instead of our financial goals. We like predicting markets and base our decisions on predictions. However, the reality is only dumb, jerks and liars predict index numbers. Analysts make a living out of predictions. And people watch them endlessly on CNBC. So who is a greater fool? Even the fund manager would not know how his/her fund will perform in future. That’s the truth.
Many people often ask, “Is Mutual Fund SIP magical?” Well, not the SIP but the consistency and discipline behind the SIP is certainly magical. We underappreciate the importance of inaction to be successful as an investor. We need to draw reasonable comfort from being lonely. The safe feeling which comes from herd mentality needs to go.
The examples of self destructive investment behaviour are as follows:
1. No financial plan.
2. Abandoning one’s financial plan.
3. Wrong temperament.
4. Making predictions.
5. Chasing performance.
6. Timing the market rather than spending time in the market.
7. Falling for herd mentality.
“You need a reasonable amount of intelligence, but the temperament is 90℅ of it.”- Warren Buffett