THE LAZY INVESTOR

Bill Gates once said, “I always choose a lazy person to do a difficult job because he will find an easy way to do it”

You know what’s the most difficult part in investing? It’s ‘Doing nothing’. With so much of noise around you, about your colleague making “x” return and another friend making “y” return, it’s really difficult to not do anything. As we don’t want to be left behind, we tend to take some action. We don’t take action to make money but only because of the feeling that if someone is making money or making more money than me, then why I can’t make the same amount of money.

Do you remember, the famous dialogue from the movie 3 Idiots “Jab dost fail ho jaye to bura lagta hai, but jab dost 1^st aa jaye to jyada bura lagta hai? “ Same way when our friend loses money, we feel bad, but we feel worst when they make money and we don’t.

Secondly, we are taught that unless we work continuously towards our goal we will not achieve it, and so we apply that to investing also. There are people who are always on top of their portfolio and ready to do some action. If markets are falling, they want to redeem money; if it’s going up, they want to add more; if Fund A  is under performing F, they want to change the Fund A and when Fund C  starts performing better than Fund B they want to dump Fund B. They feel that unless they take continuous action, they will not be able to generate returns in their portfolio.

This is where being lazy helps. It may not work in other aspect of life but in investing it works most of the time. Do you know the easiest way of doing this difficult job of investing? It’s SIP. It’s dull and boring, but apparently the most disciplined and prudent way of investing. Let’s look at some numbers to make it more relevant. Last 3 years return of Birla Equity Fund is around 4% CAGR but last 20 years is around 18% CAGR. Last 3 years return of L&T Midcap fund is around 0.5% CAGR but last 10 years return is around 16% CAGR. If one takes action at every downfall, he will seldom make money. The idea should always be to invest in a good fund house and a good fund, ride through the cycles and get good returns.

One should not change his mutual fund portfolio actively as the fund managers are doing this job on behalf of investors. Most of the good fund managers change the sector and stock allocation in their portfolio actively based on the market scenario. This not only reduces the cost for investor but also the hassles of entering and exiting the portfolios every now and then. You should change the funds only when they start giving below average return and there is no sign of improvement.

Being lazy does not mean stop tracking your portfolio but it simply means that taking the decision of inaction after looking at all the aspects. Being lazy should be by choice and not otherwise.

‘MDBSC’ – This term was coined by one of my Facebook friend. It means My Dull and Boring SIP Continues. So, whenever your friend or colleague comes and asks what are you doing in this market, simply say MDBSC. (My Dull and Boring SIP Continues).