(This column was first published on Value Research Online.)
Investing in equity mutual funds is a lot like working out in the gym. Gymming, whether you’re working out to lose weight or gain weight, gives you an obsessive compulsive disorder (OCD) of a kind. You get obsessed with your weight and feel the need to check it every day. The first thing that most people do at the gym is step onto the weighing scale. The bodybuilders as well as the weight-losers, everyone who reads their weight has an expression that says, “That’s it?” While the former are disappointed at what they’ve gained, the latter at what their lost. Nevertheless, checking their weight on a daily basis is an OCD, albeit a mild one, that every gym-goer suffers from.
That said, it is by and large a harmless OCD. It might even be considered a healthy one, since it does have to do with the betterment of one’s health. But a similar kind of OCD that comes out of investing isn’t really that healthy or harmless. It’s the OCD that has to do with obsessively checking the returns earned by your funds every single day. Now, that’s something that isn’t in your best interest.
Checking your weight in the gym drives you to exercise harder, it makes you want to change your routine for better results. That’s okay. But when you do that with your investments, when you think about changing something or the other about your funds after checking them too often, that’s not quite okay. Tampering with your investments every now and then isn’t the best thing to do.
At the gym and with investments, the most fruitful results are earned patiently, over the long-term. They key word in the previous sentence is ‘patiently’. If you’re not patient, if you tend to be in a hurry for your investments to do well, you’ll end up taking decisions that will be detrimental to your investments.
For most investors, checking the performance of their funds every 6 months or so would suffice. Anything more than that is not required in most cases. Your funds need time to deliver. Taking investment decisions – buy or sell – on the basis of short-term performance should be by and large avoided. Satisfy your OCD at the gym, but give your funds the time they need to do their work well.