What media doesn't want you to know?
Investment is all about creating a simple, diversified asset allocation plan, which should be periodically checked and rebalanced when necessary. Investment can be further simplified if you invest in a single fund of funds. This will take care of all your allocation and rebalancing part of the investment. Once your plan is ready it takes minimal investment knowledge and practically no time to manage.
Nevertheless, many capital market participants will make you think that it’s a very tough job and you need their help go through the entire investment journey. The two lies that they tell are
1. “It’s a stock picker’s market”
2. “Trend is your friend”
The first lie wants you to believe that the world of investing has changed dramatically in the last few years. The usual narrative they use is, although index funds have performed better than most of the actively managed funds, now the world has changed and hence look for fund managers who have the Midas touch and can beat the market. It is true for the short-term and for the small-cap and mid-cap category, but hardly true in the long-term and for large-cap dedicated funds. Nevertheless, as the investment horizon increases the odds favour index funds.
The second lie does have a grain of truth to it, at least in the longer time horizon. In the long run, there is only one trend and that is an uptrend. We have more than 35 years of recorded history of the Indian stock market and the uptrend is clearly visible. If you bought Sensex companies in the same proportion as they are present in the index, your odds of losing money in any one particular year were 32.5 per cent. Your probability of losing money drops to 7.5 per cent, if you increase your investment horizon to any 5-years and in case of 15 years you would have never lost money.
This does not mean everyone should be painted with the same brush, there are a number of people working in the business media who provide honest, objective and valuable information.