As humans, we pride ourselves on our ability to think and adapt. From survival instincts to Mars exploration, our journey has been defined by innovation and the urge to outdo ourselves and others. From an early age, we are conditioned to think competitively—always trying to outsmart others, be it classmates, colleagues, or neighbours. And let’s admit, we often put in extra effort when the competition is within the family! 😊
This mindset has helped us to grow and achieve the impossible. As we know, every quality has its good and ugly sides. In the world of investing, the same mindset, towards making money from money can sometimes be ugly and may lead to significant harm. The desire to “outsmart the market” has historically proved to be a curse rather than a blessing.
In reality, the stock market doesn’t reward ego, overconfidence, or impulsive actions. Also, the list of people who have genuinely outsmarted the market—think Warren Buffett, Rakesh Jhunjhunwala, and a few others—is tiny. We often ignore the fact that the celebrated investors too have made mistakes; what sets them apart is their ability to learn from those mistakes quickly, correct their course, and move forward. Yet, the stories of their success are so amplified that many believe such dramatic achievements are easily achievable.
Despite over a century of global stock market history, many of us, the so-called investors, still choose to chase trends, patterns, or predictions in an attempt to outperform general market returns. Thanks to the digital age and the abundance of free information, the belief that we can make money by simply following trends continues to grow day by day.
When we try to outsmart the market with our investment strategies, we should remember the words of legendary investors. These quotes by Warren Buffet are lessons learnt from his decades of market experiences.
“The stock market is a device for transferring money from the impatient to the patient.”
“Achievement is different from action. Not every action leads to success.”
“Never risk what you have and need for what you don’t have and don’t need.”
When the time comes to make investment decisions, there’s a high chance we might overlook these valuable lessons that could positively influence our choices. However, if we adhere to them, they are certain to yield remarkable results.
Sometimes we are so much influenced by finfluencers (as financial influencers on social media like to call themselves) that we lose sight of our investment goals and take impulsive swings at the market. This is mostly because they tell exactly what our mind wants/likes to hear. Such hasty decisions often lead to unfavourable outcomes.
Let’s step back and look at the big picture. One important observation from the study of human evolution is, that even after millions of years, humans have been reactive rather than proactive. Also, when we don’t get what we want, we gain experience, and learning from other’s mistakes is always inexpensive. These are not just general points to read and leave, but to adopt while making our investment decisions.
Think of yourself as a business owner. Great businesses grow through sales, market share, marketing, profitability, and hard work—not by relying on formulas, market predictions, or statistics alone.
Similarly….
Investing isn’t about constant action or predicting the next big thing. It’s all about:
- Having the patience to stay invested in time-tested strategies.
- Having complete conviction in our investments and investment products.
- Having the ability to be a passive observer of the ups and downs of equity market.
- Having financial discipline, asset allocation, and a goal-oriented plan along with a long-term time horizon to manage volatility.
To become a good investor by investing in stocks, we need to understand and analyse the various aspects of the stock market. The elements like P/E ratio, P/B ratio, ROCE, ROE, stock price, product USP, competition and various other factors that influence the stock price need to be thoroughly studied before investing. This analysis demands a lot of time and effort. We have observed that leaving the market analysis and investing to the experts and focusing on excelling in our core field gives better results both in terms of professional growth and investment growth.
However, the best tool that can generate wealth in the long term with minimum analysis is the Mutual Fund. Mutual funds are managed by experienced fund managers with years of expertise. Their knowledge helps to deliver impressive results. Historical data shows that mutual funds have given consistent returns in the long term, despite the market’s fluctuations, driven by political, geopolitical, and economic changes around the world.
As investors, we must focus on our strengths, respect our limitations, and approach investing with a blend of logic and humility. The secret sauces along with these are patience and the right behaviour.
Outsmarting the market consistently over the long run is humanly impossible. Instead, working on becoming the best version of ourselves—both as investors and as contributors to the planet, can increase the probability of our success.
The Ultimate Truth – Making money from money is more an art than a science.
What are your thoughts? Let’s discuss in the comments!
Shreedhara is the Founder & Director of Ara Financial Services Pvt. Ltd. He has an experience of over 2 decades in Financial Service Industry with majority of it in guiding individuals and institutions on their investments requirements.
