Imagine a cricketer coming in to bat, and on reaching 28 runs, taking off his helmet
and waving to the crowd as if he had hit a century. Why did he do that? He did it because his batting average till that point was 27.6 and he had set himself a target of exceeding that average. So when he scored 28, he felt he had succeeded.
Not about cricket That was a joke. However, it was not a cricket joke but an investing one.
No batsman in the world would celebrate a paltry score, but there are plenty of investment managers who would. Some fund managers think if they have exceeded any given measure of average performance then they need to be achieved what they started to try to for their customers.
As a saver, what is it that you would have set out to do?
To beat an index or some average? A lot of investors feel that as long as they need to do that, they have achieved something. If they are the debt investors, they feel exceeding the fixed deposit rate is the benchmark and if they are the equity investors, then they feel that exceeding the Nifty or
the Sensex come is that the life of being a successful investor. This line of thinking is reinforced by the media and analysts. The end of the year is approaching and soon, you will see newspapers,
magazines, and websites fill up with articles, tables, and graphs about what fared well during
the year. This is of use only to those who always invest on 1 January and redeem their money on
31 December. In other words, it’s useless.
An individual who invests or chooses investments based on such benchmarks could end up making some decidedly suboptimal investments. One could exceed all types of frequently used average benchmarks and still be a loser.
Exactly like the cricketer I referred to earlier. Which race are you running? Which is the actual measurement and benchmark that an investor needs to take care of? What should this be based on? The self-evident answer is something that aligns with your own needs. the meaning of Need here illustrated or to be understood that the method and measurement you need to follow to invest as well as what is the outcome that you eventually expect from the amount of investment made i.e. what is the goal of your Investment
Most folks have an exact quantity of cash that needs to be invested every month. From a return or safety perspective too, regular monthly investments are the best. I looked up the investment performance of monthly SIPs in equity funds on Value Research Online and found that almost every single fund had beat the public benchmark.
Having said that, the only benchmark that makes sense is one that's unique to you, one that is based on your needs. A general benchmark makes no sense. How many funds will you expect in the future?
Are you investing regularly to achieve the target? Have you achieved the targets you had setted in the past?
These questions, or rather, the answers to these questions, are all that matter. If the answers of above questions are mostly in the dillema or in negative, then it doesn’t matter if your investment beat the fixed deposit rate or A lot of investors feel that as long as they have beaten some index or an average, they have achieved something. the Sensex. That’s not the race you were running.
Often, in many other endeavors, as long as one maintains some motion, some activity, one gets to the target. Savings and investments are not like that. This is the hard part. Savings and investments are about having an idea of the amount one will need in the future, then finance for it, and then
deciding a direction, to route the path, whether one is going to get there. Unfortunately, there is no easier
alternative.
and waving to the crowd as if he had hit a century. Why did he do that? He did it because his batting average till that point was 27.6 and he had set himself a target of exceeding that average. So when he scored 28, he felt he had succeeded.
Not about cricket That was a joke. However, it was not a cricket joke but an investing one.
No batsman in the world would celebrate a paltry score, but there are plenty of investment managers who would. Some fund managers think if they have exceeded any given measure of average performance then they need to be achieved what they started to try to for their customers.
As a saver, what is it that you would have set out to do?
To beat an index or some average? A lot of investors feel that as long as they need to do that, they have achieved something. If they are the debt investors, they feel exceeding the fixed deposit rate is the benchmark and if they are the equity investors, then they feel that exceeding the Nifty or
the Sensex come is that the life of being a successful investor. This line of thinking is reinforced by the media and analysts. The end of the year is approaching and soon, you will see newspapers,
magazines, and websites fill up with articles, tables, and graphs about what fared well during
the year. This is of use only to those who always invest on 1 January and redeem their money on
31 December. In other words, it’s useless.
An individual who invests or chooses investments based on such benchmarks could end up making some decidedly suboptimal investments. One could exceed all types of frequently used average benchmarks and still be a loser.
Exactly like the cricketer I referred to earlier. Which race are you running? Which is the actual measurement and benchmark that an investor needs to take care of? What should this be based on? The self-evident answer is something that aligns with your own needs. the meaning of Need here illustrated or to be understood that the method and measurement you need to follow to invest as well as what is the outcome that you eventually expect from the amount of investment made i.e. what is the goal of your Investment
Most folks have an exact quantity of cash that needs to be invested every month. From a return or safety perspective too, regular monthly investments are the best. I looked up the investment performance of monthly SIPs in equity funds on Value Research Online and found that almost every single fund had beat the public benchmark.
Having said that, the only benchmark that makes sense is one that's unique to you, one that is based on your needs. A general benchmark makes no sense. How many funds will you expect in the future?
Are you investing regularly to achieve the target? Have you achieved the targets you had setted in the past?
These questions, or rather, the answers to these questions, are all that matter. If the answers of above questions are mostly in the dillema or in negative, then it doesn’t matter if your investment beat the fixed deposit rate or A lot of investors feel that as long as they have beaten some index or an average, they have achieved something. the Sensex. That’s not the race you were running.
Often, in many other endeavors, as long as one maintains some motion, some activity, one gets to the target. Savings and investments are not like that. This is the hard part. Savings and investments are about having an idea of the amount one will need in the future, then finance for it, and then
deciding a direction, to route the path, whether one is going to get there. Unfortunately, there is no easier
alternative.
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