Learn to invest
This post stems from a question I was asked a couple of years back: ” Why should I learn to invest when I can invest in a couple of good mutual funds?”
Doesn’t that seem logical? After all, mutual funds are handled by professionals of the field and most of them follow the principle of fundamental analysis based investments.
It is logical indeed, the question though is: Is it the best use of your funds? And if you can spend a little bit of time each week, then won’t you be able to make better, well-informed investments?
Here are the reasons why I think you should learn to invest. You may not agree to some of them, but my experience has taught me that they matter.
Making you rich is no one else’s responsibility
It is your own responsibility. Don’t get me wrong here. I am not saying that mutual fund or any other scheme doesn’t fulfil their responsibilities. It is that overall, a mutual fund manager or an investment analyst is doing his job.
Whatever he is doing is related to that job only. That’s why you hear about such a small number of very successful mutual fund managers. These are the rare, passionate ones.
But, overall their focus is to generate results which are better than average. Even if it is better than their peers by a slight margin, they are considered good. Which is unavoidable, when you consider that mutual funds are part of the financial services sector, and all sector has their own benchmarks and standards.
Which means to find a good investment scheme is sometimes like finding a good doctor. Looking at right parameters, past results current growth sectors etc. Basically, you need to learn about it.
The herd mentality of investment schemes
Statistics have shown that mutual funds too, follow the herd mentality. Which means, the way they approach the analysis of any company is quite similar to each other.
This doesn’t mean that they are the same to each other and you can invest in any of the mutual fund schemes. Of course, there are schemes which perform better than others. This is due to investment analysis skills of their mutual fund manager and research team.
The herd mentality investing comes into the picture when you see the holding patters and churning ratios of different mutual funds. Despite, promoting long-term investing to masses, what you see is similar holdings across different schemes as well as high churning ratios.
And simply stated, when you are doing what everyone else is doing, then you get results similar to what everyone is getting. In a bull market, like the last couple of years, this sounds good strategy, but when the market turns bear, then you see catastrophe across the board.
It requires knowledge to choose from different investment schemes
Do you know, how many types of mutual funds are there? Or that you should invest part of your investments in debt funds to take care of bearish or volatile market? Or how to take benefits of CD, corporate FDs for higher returns? And many more such questions?
On top of that, different financial advisories(worth their salt) have built several model portfolio segregated according to different income groups, age, marital status & few other factors. You are recommended investments based on which box you fall into.
Again, is this wrong? No. They have to serve many clients and they make decisions based on what data about statistics and probabilities tell about it.
But, is it the best choice for you? That is debatable.
Even if you fall into one particular group, that doesn’t mean you can’t take benefit of extra knowledge. The knowledge and opportunities which are known and available to another group. There is always a chance that you can decide to change your habit of saving and investments based on what you know.
The only way to have this knowledge is to educate yourself about them. Knowing all of them is exhausting and provides no extra benefit. But still, there are plenty of avenues available to retail investors which can be properly allocated for maximum benefits.
Then last but not least:
It’s easy to learn to invest
It is easy and it is fun too.
You don’t need to bury yourself in books to read about investments. There is plenty of good quality, well-explained content available content (including this site) where you can learn to invest. That too in your own time. At your own pace.
Besides most of these resources are available on your mobile too. So you can do this while you are commuting, travelling or resting on your couch. No need to carry books with you.
With technology, it has become easier to learn about the investing as well as to invest itself.
I sincerely wish that with this understanding, you understand that if you want to invest to create long-term wealth, you need to educate yourself about it.
Investment skills are something that takes time to develop but just like good healthy habits, they are worth it in the end. They let you have the life that you dreamt for yourself. Without burning yourself down while achieving your dreams. Giving you the option to be finanically free at a young age.
When you can actually live the life, while you truly can. And all it takes is a couple of hours a week or 20-30 min everyday. That’s it.
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