No, no, no

The other day, someone on my software team pointed me to this YouTube short from a 'techfluencer', albeit one who talks not about tech gizmos but about software development. Here's what the man said, "This is my strongest stance on software engineering: you don't need a lot of management. What you actually need is to have a group of people that simply say no. No, you can't use this framework. No, you can't introduce more abstraction. No, stop trying to create our own brand-new spanking protocol. Like, that's it. And I think all software engineering would just be a success."

Suggested read: Let's be boring

This has the requisite amount of online hyperbole but a large kernel of truth and one that's true of many fields. I can personally vouch for this being absolutely true for investing. Beyond the basics, the less you do, the less you try, the better off you are.

This is the opposite of what is true for most areas of life. If you Google the phrase "bias for action," one of the first results is this: A bias for action is one of the most necessary traits for a successful entrepreneur. Studies find that an ability to make decisions quickly and to act upon them is one of the key determining factors differentiating successful people and companies from unsuccessful ones.

This principle extends beyond entrepreneurship to most aspects of life, including employment, education, athletics, and even navigating Indian roads. We tend to apply this same mindset to savings and investments. When envisioning investment activities, most people might imagine a constant cycle of research, selection, monitoring, exploration, and portfolio adjustments. With numerous investments, this could become a full-time endeavour.

Suggested read: Just do simple stuff

However, this perception is misguided. The primary "activity" in investing should be inactivity. For the majority of an investment's lifespan, the investor should remain hands-off. The core of investing lies in patience—allowing months and years to pass as your investment grows, nourished by the steady flow of your SIP contributions.

This counterintuitive approach to investing might seem passive or even lazy to some, but it's backed by a great deal of personal experience and real-world results. The legendary investor Warren Buffett once quipped, "The stock market is a device for transferring money from the impatient to the patient." This wisdom encapsulates the essence of successful long-term investing. The challenge lies in resisting the urge to constantly tinker with your portfolio. The financial media, with its 24/7 cycle of news and analysis, can create a false sense of urgency. Every economic report, political development, or corporate announcement might seem like a reason to buy, sell, or restructure your investments. But more often than not, these short-term fluctuations are just noise in the grand scheme of things.

So, while the 'bias for action' might serve you well in many areas of life, when it comes to investing, cultivating a 'bias for inaction' could be your path to financial success. It's about setting up a sound investment strategy based on your goals and risk tolerance, then having the discipline to stick with it through market ups and downs. In this context, saying 'no' to unnecessary changes and resisting the temptation to overreact to market movements becomes a powerful tool in your investment arsenal.

At present, Indian equity markets are soaring to unprecedented heights. Many investors, particularly those who have consistently invested in equity mutual funds, are witnessing substantial returns on their investments. Such a bullish market often triggers a sense of euphoria, prompting investors to consider taking aggressive action. There's a natural inclination to capitalise on the upward trend, perhaps by increasing investments or venturing into riskier assets.

However, this is precisely the moment when restraint is most crucial. The prudent approach is to maintain your current investment strategy without making any drastic changes. Resist the urge to make extraordinary moves or deviate from your long-term financial plan. Since you have actually read this column and reached the end, you are probably the sort who already has SIPs running in a few good funds. That's all you need.

Also read: Keep it simple, as simple as possible