Ten Commandments of a Successful Investor By Malhar Majumder ( FCMA, ACS) , Partner, Positive Vibes
On a cold winter evening, over a hot mug of coffee, I and my friend Dr. Surojit engaged in a debate on the benefits of applying Artificial Intelligence (AI) in painting. My friend, shared that all one needs to do is describe one’s thoughts in words, and the painting will appear right on your screen, thanks to AI. Another friend, Nandini, added that the output generated will also be copyright free.
It is very common today for most professionals to anticipate the potential disruption AI can bring about in their line of work. But the tables quickly turned when our friend Partha, a software engineer by profession and an artist at heart, shared his perspective.
He observed that AI does not create original art; it merely mixes several original art pieces stored in digital real estate and presents just a smart iteration. If creativity were cease, at some point, AI too will reach its saturation. The bottom line of the conversation was that an original idea can never be replaced with spawns.
How does the above outcome affect someone deciding to put money in equity market? The famous American investor, Howard S. Marks, says, "Investing is more Art than Science". An AI may churn numbers with maximum proficiency and tell us the best place to invest, but will it be enough to nudge the investor to take the final decision? Then again, if everyone makes the same decision: and buys the same product, will it help to achieve the intended result?
Ultimately, human preferences will always play a significant role in taking the final investment call. And if by some means, a decision is taken without considering the original need, it will get reversed sooner than later.
This is why research in personal finance shows that returns generated by an asset class is always more than the return achieved by an individual investor who has invested in the same asset class.
This brings us back to our theme, which is the originality of a successful investor. Does a successful investor chase a product that has historically given maximum return or opt for a product which will help meet the investor’s personal needs? The answer to this is quite straightforward. While Indians love discussing equity markets in general, data shows that only 4.8 per cent of the households invest in equities. This is a clear proof of how talking (activity) does not bring about action (investing).
Personal investing is about questioning yourself about your comfort levels associated with various asset classes, risk tolerance, investment horizons for various goals etc., rather than pondering over how an asset class will behave in the future. If you have read up on this, I am taking the liberty to introduce you to the remaining nine commandments (beyond originality) that will make an individual a successful investor.
Each of these points has been deliberated on in great detail across several investment literatures. After traversing through and collecting all those pearls of wisdom, it can be deduced that a successful investor will be someone who decides to travel alone. In the words of the great poet Robert Frost, "Two roads diverged in a wood, and — I took the one less travelled by, and that has made all the difference."
Successful investing is all about knowing youself, your realities, challenges and priorities. No two individual’s life is the same and so will be the case with personal finance. Instead of busy trying to impersonate what another individual is investing into, ask yourself do you need it? Does it fit in your asset allocation plans? Is there a better alternative? Most often we know the answer to these questions. If you are still unsure how to navigate with your personal finances, then it is best to seek the help of a trained or qualified financial advisor who can help you navigate and reach your destination in a stress-free manner.
The author is a partner in personal finance firm ‘Positive Vibes’. He also teaches at IBS-Kolkata
_20241018155600_original_image_20.webp)
