Which are the Top 10 Diwali 2023 (Samvat 2080) Mutual Funds / Stock picks to invest in? Whether one must follow these mutual funds and stock recommendations and change our portfolio yearly?
“I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.” Warren Buffett
For the next week media and social media will create a huge noise in predicting their recommendations of stocks and mutual funds to invest during this Diwali 2023 (Samvat 2080).
In the financial industry, there are N number of experts who claim that they are the BEST in the industry of finance and prediction. But as an investor, should we trust these predictors (I call them NUMEROLOGISTS) and change our investment strategies, funds, or stocks? In fact, at first, if you are changing your funds or stocks, based on festivals, then you are a TRADER / SPECULATOR but NOT an INVESTOR.
The theory of probability is one of the biggest tool the financial industry use to predict future performance. How successful they are unknown to us. However, they force us to believe that their predictions are 100% true.
The reason why such predictions are alive is mainly because if the predictions go wrong, then the probability of loss is less. However, if the predictions go correct, then the probability of profit is huge for them but not for you. Hence, targetting this in mind, the whole financial industry will always be in a prediction mode.
How many of us predicted events like 9/11, the Lehman Brothers collapse, COVID-19, the Russia, and Ukraine War, and the ongoing Israel and Hamas War? NONE!
Let me share with you what Daniel Kahneman wrote in his famous book “Thinking, Fast and Slow”.
“Mutual funds are run by highly experienced and hardworking professionals who buy and sell stocks to achieve the best possible results for their clients. Nevertheless, the evidence from more than fifty years of research is conclusive: for a large majority of fund managers, the selection of stocks is more like rolling dice than playing poker. More importantly, the year-to-year correlation between the outcomes of mutual funds is very small, barely higher than zero. The successful funds in any given year are mostly lucky; they have a good roll of the dice. There is general agreement among researchers that nearly all stock pickers, whether they know it or not-and few of them do-are playing a game of chance.”
I remember the famous quote of Carl Richards – Risk is what’s left when you think you’ve thought of everything. No matter how much we prepare with our predictions, there are always certain risks that NONE can predict. This is typically called RISK. Managing this risk should be the task of an investor rather than trying to run behind these numerologists.
However, our mind is more inclined to such prediction theories of so-called experts. Mainly because in the world of uncertainty, we are looking for some solace of certainty. Whether we be successful or not is unsure. But due to this human behavior of searching for solace, we run behind such prediction theories.
25+ years ago, Charlie Munger gave a talk called The Psychology of Human Misjudgment. He listed 25 biases that lead to bad decisions. One is the “Doubt-Avoidance Tendency,”. According to this tendency, most of us don’t think in probabilities. It’s natural to quickly seek one answer and commit to it. This is what we all as investors try to look at experts saying – You are an expert. You do the research. Just give us the readymade stocks or mutual funds. We INVEST.
Exploiting this tendency of humans, TV Media, Print Media, or Social media list some readymade stocks and mutual funds. Nothing wrong with them. Because we are expecting and they are fulfilling our wishes!!
However, have you ever asked the question – what is your financial status with the person who is recommending you few stocks or mutual funds to invest in Diwali? What is your risk appetite to the person whose advice you are eagerly awaiting to follow? If the person who is recommending you lost around Rs.10 lakh, then it may not be a big issue for him. However, a loss of around Rs.1 lakh may be the biggest disaster for your financial life.
Once again sharing two quotes that I shared last year also to REMIND YOU.
“Just as nature abhors a vacuum, people hate randomness. The human compulsion to make predictions about the unpredictable originates in the dopamine centers of the reflexive brain. I call this human tendency ‘the predication addition’.” – Jason Zweig (Your Money and Your Brain).
Nifty is up by around 7% from last year’s level. Check how many perfectly predicted this. The answer always is NONE.
The game of prediction is full of probability. Sometimes LUCK may also play a part and they claim this also as their SUCCESS. Show me one fund manager or these predictors who accepted that in their predictions LUCK played a role. NONE…
I wrote an article based on the past 18 years of Nifty TRI data to show that market timing or prediction is a FUTILE exercise. I did the research of past 18 years of data where Mr.A invests every month only when the market is high, Mr.B when the market is low in that month and Mr.X does monthly investment on the same date (5th of every month) without bothering the market up and down. The results at the end are interesting. Refer to my post on this aspect in “Best Market Timer Vs Worst Market Timer Vs SIP Investor of Nifty – Who is the winner?“. I provided that there is nothing called a BEST day to invest with one more post “Best SIP Date for Mutual Fund Investment in India“.
There is a thin difference between financial experts who predict and recommend products to PALM READERS or NUMEROLOGISTS. Only their color is slightly changed. Palm readers or numerologists speak about our life and these financial experts about money. Rest everything is SAME.
Top 10 Diwali 2023 (Samvat 2080) Mutual Funds / Stock Picks
Repeating what I repeated last year. Because some basic fundamental investment rules will never change.
These are the kinds of gifts you can give to your investment.
Try to update yourself with wonderful books available about investment. My recommendations are as below.
- The Intelligent Investor – Benjamin Graham
- The Psychology Of Money – Morgan Housel
- Common Sense On Mutual Funds – John Bogle
- A Random Walk Down Wall Street – Burton Malkiel
- Your Money and Your Brain – Jason Zweig
Yes, many think that investment is more about product selection or buying and selling. However, it is more about the behavior aspect. If you are successful in your behavior, then you can easily win the game of investment.
Burn your ego this Diwali. Just because you have invested in a particular fund or product, it does not mean that has to perform BEST. Once you invest, then your task is just to look at the performance. You can’t control the performance of the market of funds after that. Hence, but that ego and accept the realities. You may be highly qualified in your field. However, in the investment world, it is EQ that matters a lot more than IQ.
# Be your own Planner
After being in this industry for more than 12 years, I can say that investment is more of common sense and behavior than market timings or product selection. Hence, using these two traits try to be your own financial planner. You can use our Do It Yourself (DIY) financial planning module. For how many years you depend on someone else to manage your money? One day or another day you have to take care of this. Then why not take action?
# Stop PREDICTING
No one is aware of the future. This is the hard truth that you must learn fast when you are entering the investment world. The more you learn fast the better for your money. Otherwise, you will always be in search of these top picks of stocks or mutual funds.
How to run away from Top 10 Diwali 2023 (Samvat 2080) Mutual Funds / Stock picks?
# Switch off business news channels or media (including social media) where the predictions will continue for the next week.
# Stick to your goal-based planning no matter what many rumors surround yourself that the market may go UP or DOWN.
# Stick to your defined asset allocation rather than changing the allocation just because there is an opportunity to invest.
FINALLY, TRY TO CONTROL WHAT CAN BE CONTROLLED LIKE RISK MANAGEMENT AND YOUR BEHAVIOR. You can’t control the market or the market will not treat your money, especially just because you have invested. The controlling should be through proper asset allocation as per your goal time horizon.
HENCE, LET US CONTROL THE CONTROLLABLE THAN TRYING TO PREDICT OR BEING IN THE TRAP OF THESE PREDICTORS (SORRY….NUMEROLOGISTS).
A few articles that I wrote the last year that you may like to read are as below.
- How To Find Safe Index Funds To Invest In India?
- How Much Returns To Expect From Nifty 50?
- Can We Beat Inflation By Investing In Gold?
- NIFTY LargeMidcap 250 Index Fund – Should You Invest?
- Who CAN Invest In Small Cap Funds?
- How To Choose The Best Index Funds Suitable For You?
- Nifty 50 Vs Gold – Which Is The Best Investment?
- Gilt Funds Vs Bank Fixed Deposits – Which Is Best?
Finally…I end this post by sharing this wonderful quote from Howard Marks.
“One of my greatest complaints about forecasters is that they seem to ignore their own records. The amazing thing to me is that these people will go on making predictions with a straight face, and the media will continue to carry them.” Howard Marks