(This column was first published on Value Research India.)
I write this about 3 days before you’ll be reading this, in case you read it on the day this column is published; I hope you do. I would urge you to read all columns on the very day they’re published. We writers are often insecure people, and we need the gratification of a high number of clicks on our work when it’s published.
But anyway, just before I sat down to write this, I read a piece in a leading newspaper about the CPSE ETF that has given around 56 per cent returns in about two and a half months. Wow! Last week, I read about how the Indian mutual fund industry’s assets under management cross Rs 10 lakh crore for the first time ever in May 2014. Wow! Also, the Sensex and Nifty closed at records highs earlier this week. Wow!
What brilliant numbers, right? I’m sure you’re impressed. I am. But I have to wonder – do they mean anything to you and me, the ordinary individual investor? I’m not too sure. Of course, if I had invested in the CPSE ETF, I’d be jumping around in joy right now. But I hadn’t invested in the ETF, for 3 reasons – 1) I follow the basic principles of investing, 2) I am not clairvoyant, and 3) these 2 reasons are enough.
The CPSE ETF had its NFO in March, and one of the basic principles of investing is to not put your money in something you don’t know anything about. We’re investors, not fortune tellers. If we could predict which funds or sectors would do well in the coming months, we’d all be leaving your day jobs and doing just that. But we can’t predict, and I’m personally not too fond of speculating, which is why I tend to avoid any fund that’s new and any fund that has a constrained mandate. The CPSE ETF is both.
In my humble opinion, it’s best to invest in a diversified fund and leave the speculations and predictions to an able fund manager and his research team. Let them do their job while I do mine.
This brings me to my job – writing, and getting feedback from my readers. But this feedback is a lot like the numbers that I have listed earlier. The Sensex going up or the fund industry doing well or a particular fund doing exceptionally well makes me feel good, even if it doesn’t necessarily have any major impact on my investments. Similarly, a high number of clicks on my columns make me feel good, even if doesn’t necessarily mean that everyone’s who’s clicked on the link has read it.
That’s the thing about numbers, you can let yourself feel good about them but you shouldn’t allow yourself to get carried away by them. More often than not, chasing numbers, especially short-term numbers, only leads to fewer things to feel good about in the end.