Don’t be a lazy investor. Be super lazy

Yes, you heard this right. The title is correct- Don’t be a lazy investor, be super lazy. This is not crazy advice. Crazy is when investors do otherwise. There are so many misconceptions around the stock market and people instinctively believe them without checking the facts.

I start smiling when people say-

–       You have to move fast in order to take advantage of the market.

–       You should know when to get in and when to get out from the stock market.

–       You have to beat the market to earn big from the stock market.

–       Experts know when the market would rise and when it would fall.

But to debunk these myths, you need to rely on two solid sources-

–       What the experts say and do.

–       Compare the results between active investors Vs lazy investors or should I say super lazy investors.

Warren Buffet is famous to hold his investments for good 20,30 and even 40 plus years. Same is true for his guru Benjamin Graham and his partner Charlie Munger. Back home, if you see the portfolio of some of the most successful fund houses, you will find that they hold stocks for the long term. In fact, I got the title of this article from Mr Pulak Prasad who is a champion fund manager with unparalleled track record.

Now compare the records of the investors. I have a long list of my own investors who have amassed a decent wealth by staying invested without too much action. They simply bought good funds including index funds and remained invested without bothering whether they were beating the peer group funds or not. On the other hand, investors whether investing in direct equity or in mutual funds who remained very active, continuously tracking the market, tracking the other funds or stocks as well as the market have a mediocre track record. They have performed miserably compared with the market and on top of that paid more taxes and fees. Besides they have wasted too much time which they could have used in their profession and enhanced their career and income.

So, the stock market has a very strange functioning. It rewards people who are not bothered about it and keep enjoying their life. On the other hand, investors who spend a lot of time and energy to study the market perform poorly. Unfortunately, most of the people don’t know this secret and feel that since they don’t have time and expertise to study the stock market hence, they should not enter the market. I hope they understand the truth.

But it is not as if you don’t need to do anything. Your laziness once you enter the stock market works only if you have done the following things right and continue to vigil them-

1. You need to discover your important financial goals.
2. You need to be alert towards your income and your expenses so that you can increase your savings and deploy it towards investments.
3. You need to do proper asset allocation. This means you need to divide your assets between equity, debt, gold and international equity. Asset allocation depends upon your financial goals, time horizon and your risk profile.

If you look at the above-mentioned points, you will notice that all these points are your own and fully under your control. So, in that sense, your investment planning is more an internal thing rather than what is happening out there. In that sense, Investment is quite like meditation. You remain alert and you remain focused internally during meditation. For example, you remain focused on your breathing while doing meditation. This itself creates immense consciousness and enhances your handling of outside things. Investment planning is no different. While you focus on elements which are under your control, that results in enormous outside wealth creation.

Manoj Pandey
CFP