Difficult, yet easy

Our cover story of 'Mutual Fund Insight' June 2023 issue is quite a brave one, not just for the strong opinions it offers but also for the sharp reaction from our readers that it risks. It is a simple fact of human behaviour that people do not like being told they are wrong, which is what, in a somewhat indirect way, our cover story does.

In the past twenty years, across the different websites and magazines published by Value Research, I have noticed that articles with a negative tone tend not to be well-received. You might wonder what constitutes a 'negative' article. As I said, a prime example is this issue's cover story. A negative article or analysis focuses on the pitfalls of saving or investing, outlining what to avoid. In contrast, a positive article highlights the benefits and offers guidance on what actions to take. Positive articles focus on generating profits, while negative ones emphasise preventing financial loss. Ultimately, both enhance your returns, and both are necessary.

It's a bit like staying healthy. As many people discover at some point in their lives, what's wrong with most of us is not that we don't do things that will keep us healthy. Instead, the base state of a human being is healthy. But, nowadays, most do things that make us unhealthy. We cannot become healthy by eating healthy food in addition to junk food. First, junk food must be eliminated. That is the exact equivalent of what happens in investing.

However, paying attention to bad investing habits they may have picked up becomes hard for people to do. Investors typically prefer not to focus on avoiding financial loss. They are naturally optimistic individuals. It seems as though engaging in investing instils optimism in people, but that may not be true. The arrow of causality points in the other direction - it is the inherent optimism of some individuals that leads them to invest, especially in equity-based funds. To begin investing in equity funds, one must be deeply convinced that the future will be brighter than the present. Everything else follows from that.

You can probably see now why I'm a little circumspect about our cover story. If my primary concern was always to expand our readership and satisfy all readers, Value Research would focus solely on positive, uplifting stories. Regrettably, investing is more complex than that. Poor decisions can inflict significant damage on your investment value, and at a faster pace than can be offset by your good investments. Clearly, if you aim to invest both profitably and securely, what you avoid doing with your money might be more crucial than what you actually do. So, how can you sidestep mistakes? The initial step is to conquer your reluctance towards negative stories and join us in seeing where people go wrong.

As it happens, a few well-defined patterns of counterproductive investment beliefs and practices are common among mutual fund investors. According to my experience, in aggregate, these account for much of the grief that comes the way of mutual fund investors.

Of course, I don't mean to scare anyone off investing by making it seem too difficult. There are things where success depends on doing the right things and things where success comes from avoiding the wrong things. We are actually lucky that mutual fund investing belongs to the latter category. Really, it means that making money is not difficult. All you need to do is refrain from making mistakes, and you'll accumulate substantial wealth! This sounds too easy, but I have some good news for you. It's almost that easy. With the right research, guidance, and a disciplined approach, you can navigate the world of mutual fund investing, sidestep pitfalls, and reach your financial goals. It takes patience, staying informed, and learning from others' experiences to make the most of this relatively simple path to prosperity.