Friday, 10 June 2016

Don't Worry about Your Returns. Worry about Playing the Game Well.

Perhaps nothing has caused more harm to stock investors than worrying incessantly about returns. The stock investor is perennially in virtual competition with not only other stock investors but also with mutual funds. The argument goes that if you can't beat the benchmark, you shouldn't be investing yourself but should take the fund route, since many mutual funds have a proven history of beating the benchmark. If you do beat the benchmark but there are funds that have given better returns than what you have generated, again you should go by the fund route, they say. I wonder what if Warren Buffett and other star stock investors had invested in funds. Would they have reached the stature they command now? The answer is a clear no. Can you name a famous “fund investor”? At least I don't know any.

Those who make it big focus on playing the game and conquering it. In the stock market, it is self-defeating to worry about the returns your stocks are generating and then comparing them with whatever. What matters is understanding the game and playing it well. Once you have understood the game, the returns are natural to come. Hence, it's crucial that you don't get swayed by whatever whosoever is doing or saying. Rome wasn't built in a day, and your stock success will also take its fair share of time. Be patient and stand your position.

The biggest cost that you pay when you decide to quit is not learning how it works. Ignorance is not bliss. When you decide to quit, there are people who carry on amidst uncertainty and eventually find the way. Once they get the key, their lives are transformed. That's true in the stock market also. So, don't be embarrassed if you are underperforming the benchmark or some fund is doing better than you. Don't feel diffident if you have been running in losses, while the guy next to you has been making money in a great fund. Just stick to your path; learn, understand, and try again. Once you have cracked the code, the top fund manager may as well want to follow your footsteps.