Education Qualification is the least required qualification for investment

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When I wrote the article “What was my advice when stock market crashed in 2020?“, I have mentioned that I am going to share with you all two of my client’s stories. In this post, I am trying to share and prove that your educational qualification is the least required qualification for investment.

qualification for investment

Even I tried to expose this in my earlier post “Best Market Timer Vs Worst Market Timer Vs SIP Investor of Nifty – Who is the winner?“.

However, even though we are aware of all these, we the educated tend to over smart in investing as we think we are highly qualified means we have an extra edge over those who are not so qualified.

Education Qualification is the least required qualification for investment

Few months back I wrote an article about a cab driver. That article turned hugely popular among all social media platforms. I have written a real-life story of a mutual fund investor who is constantly holding his investments in the same funds for a long.

Refer to that wonderful story “Cab Driver and his 10 Yrs 15% Equity Returns – What we can learn?his 10 Yrs 15% Equity Returns – What we can learn?”. In this post, I tried to highlight that how ignorance created wealth for this cab driver.

Coming back to the purpose of this post, the one story which I wish to share is of a cab driver and another story of an IDBI Bank Manager who did her MBA in Finance. One is illiterate about investment and another is highly qualified.

I don’t want to repeat the story of a cab driver. You can refer to the above-shared post to read more about him. Instead, I wish to share the story of this IDBI Bank Manager.

She contacted me to review her portfolio during the mid of 2019. I found that around 95% of her portfolio was in equity mutual funds. She was holding around 25-30 funds. She started her journey of mutual fund investing in 2008. So for her its almost around 11 years of journey.

When I reviewed her portfolio, I suggested her to revamp and trim the number of funds. Accordingly, I also suggested her to follow the concept of asset allocation.

However, her question to me was “When the funds are generating fantastic returns ranging from 10% to 18%, why do I have to move to debt where the returns are around 5% to 6%?”.

Yes, her question was valid. However, I told her “Luckily you are investing from 2008 and afterward during this 11 years of journey you have not experienced any market crash and whatever you invested turned in green. That itself created confidence (over-confidence) inside you that your strategy is right. However, the first step fo investing is asset allocation based on your goals and to protect whatever you gained rather than taking a blind risk.”

She did not listen to me and I was also not worried much as she approached me just to review her portfolio. After that our interactions ended there.

However, last year during the month of July, she approached me again to recommend few debt funds. I surprised by her need as she was firm believer of equity and doing equity investing since 11 years and what made her to think of debt fund? Her answer was “I saw huge downfall during 2020 market crash and with fear I withdrew everything with a loss of around 30% to 40%. Now I don’t wish to enter into equity market again. Hence, I need few safe debt funds to invest”. Accordingly I suggested her few funds.

Again few months back, she called and asked me equity fund recommendations. It’s again surprising to me that why her position now changed to equity? Her answer was “I lost around 30% to 40% in 2020 and now I am seeing huge uptrend in the market. Hence, again I want to regain of whatever I lost last year through equity.”

Do remember that she was confident during 2019, she lost confidence in 2020 and again she wish to enter into equity in 2021 with a hope that she will get back of whatever she lost last year.

Instead, if she kept her calm without worrying the notional loss, then she might be in far far better position than others. However, our mind will not work liks this. Instead, both FEAR and GREED force us to stop act wisely with our behavior control.

These are the two real stories which I share with all my new clients or with few prospective clients to understand the importance of emotional controlling than education.

Education makes us to eligible to read, write and to certain extent understand. However, our formal education fail us to teach the basic and important concept of how to control our behavior, fear and greed.

Hence, no matter how much educated you are, make sure to start learning about investing as if you don’t know anything. Your educational qualifications are useless when it comes to investing. To certain extent they may give you an advantage over illitretate. However, beyond certain level it is how you behave and control the risk matters a lot rather than your degrees.

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8 Responses

  1. Hi Sir…
    I am interested in Lic ipo.Can i apply for a lic policy now to participate under policy holder category? is it a good idea or not?

  2. Hello Sir,

    Very nice article. Btw, just wanted to share my viewpoint as well.

    Suppose, 100 people, invest in mutual funds (any index/active – doesn’t matter), many people have assumptions that it is an easy way to become RICH. There would be less than 3% people who will make good money rest majority of the people will be in 10% profit to major losses. THINK ABT IT – We only earn when someone else takes LOSS.

    Instead of investing in assets like stock markets, it’s better, we do our own business which is the only way of becoming RICH where we have good control over it. Why give money to others in order to get RICH.

    I personally feel, instead of targeting a 3% window to become successful in the stock market and wasting time, everyone has a higher chance of getting success in any business.

    Now, some will say, I will work on my emotional aspect during investment but why do you want to experiment?

    All the companies we invest in (all big names we hear are businesses).

    For example, a person is doing a SIP of 10K means 1,20,000 per year means if a person tries for any business for 1.2 lacs (10 businesses in 10 years). Don’t you think, success chances are almost 97% and your coming generations will live happily and debt-free. Well, if a person can’t even be successful after giving full efforts in 10 businesses in 10 years then NO COMMENTS. Gone are the days, where in order to do business, a person needs big capital for any business, its DIGITAL world now and there are tons of ways to earn big money with a very small amount.

    The biggest reason – why people don’t succeed is LAZINESS. We can work like laborers for our bosses but when it comes to our personal growth (physical, mental, spiritual, financial, social etc) – do we really put efforts – very minimal >>> that is the biggest reason we are where we are.

    Lastly, my suggestion to everyone is to DEVELOP any SKILL SET then keep working on it, 1 day you will surely be RICH and please also work on the ways how to attain peaceful life and enjoy it fully.

    Also, there is a misconception in the world – the only way to become RICH is to THINK different – partial right but even if we have a HERD mentality (thousands of brands selling clothes, beauty products etc etc) we can still be RICH – NO NEED to be EINSTIEN lol

    Very rarely, I write anything but today I came across this blog so thought of sharing something. Guys, plz understand the world is trying to PLAY with your HARD-EARNED money, I really feel PITY for honest investors especially those who are old age people and running towards this market.

    Thanks & God bless!

    1. Dear Susan,
      I respect your views. However, here we are discussing investment but not professional skill development and starting their own. I agree that for every buyer there are seller in STOCK MARKET but not in Mutual Funds. The concept you understood applies to direct stocks. Regarding who win in the market, it is those individuals who stick for the long term, not those who look for quick rich ideas.

  3. Thanks for this article
    I have been researching a lot about Debt mutual funds, I dont understand the rationale why Debt funds need to be considered at all when it gives hardly 1% or so over bank FD ? As you suggested in your other blogs, I feel its better to go with Bank Deposits for short term goals

    I noted that you suggest 60% equity and 40% debt for long term goals. Even there I am trying to understand whats the need of debt, why not invest 40% in bank deposits instead when debt funds dont usually give significant returns over FD. Please help me in understanding this.

    1. Dear Rohith,
      I am not sure which debt fund you are pointing to. However, people go to debt funds mainly because of its tax advantage over the FDs for long term holding. I think you forgot that aspect while comparing.

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