Friday, October 11, 2013

3 Principles to generate superior returns from your investments...

On 31st March this year the BSE Sensex was at 18835.
The return across different time periods looked like this:
1 year 8%, 3 Years 2%, 5 years 4% and 7 years 8%

To anybody investing in Indian Equities over the last 7 years! It has without doubt been a painful experience.  This is understandable but not justified, if you have set your goals and believes in your financial plan.  The challenge is to control your emotions, to stay away from panicking and taking impulsive decisions regarding your portfolio. It is not so hard if you believe in basics.
We all like our investment to generate the best (which in our mind is highest) returns.  Rather we should aim for superior returns across our lifetime.
First to understand “Superior Lifetime Returns” – it’s not the highest return but return that is required to achieve goals with minimum time, effort & stress. If you stick with these principles & practices – they will account for 90% of your investment success.  So here are the 3 Principals to ensure your investments deliver SUPERIOR RETURNS…


There is difference between hope and faith.  Hope is the state which promotes the desire of positive outcome related to events and circumstances in one’s life or in the world at large. But we don’t have proof for hope.  Faith on the other hand (at least in the investing world) is based on historical data and facts.  You need to be an optimist to make create wealth in equities.  Equity may delay returns but have never denied it.


Warren Buffett once said “The Stock Market is a highly effective mechanism for the transfer of wealth from the impatient to the patient.”  Some may not lose faith easily but they do lose patience.  We are beginning to learn from our media to focus on the “Breaking News” rather than the complete picture.  Likewise in investing we focus on the current bleak situation rather than on our own long term goals. Even the long term investor is tempted ‘right now shift to debt till the things improve’.  In doing so have you considered that you are attempting to be right Twice Over !!!  Once when trying to exit, and once when re-entering.  There is no successful investor who can ever boast of getting this strategy right consistently.


Patience will help in not doing wrong things and Discipline will help in keep doing right things.  All of you at some time or the other have heard me speak of SIP (Systematic Investment Plan).  This is the medicine that will bring discipline into your investing.  Dispassionate investing on a monthly has weathered many a storm and given Superior Returns over time.  Remember discipline fails, the plan fails.

Coming up next – 3 Practices to achieve superior returns from investments…

This article has been inspired by a Financial Planner Hemant Beniwal.  His articles regularly appear in financial magazines.

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