I spent most of my adult life on trading desks at big banks, helping institutions buy and sell portfolios of stocks. These were multi-billion dollar firms, with the smartest talent, access to unlimited information, working only on making money 24/7. Yet, despite all the resources, even the best firms didn't seem to outperform with much consistency. Not only that, strategies that worked once weren't guaranteed to work again.
If you look at the performance of these funds over the past few years, they reflect that struggle. In the US, more than 80% of managers have underperformed the broader market over the last decade. The numbers in India are no different over the past five years.
“Ok, so professionals with years' of experience, spending all day on this, are failing. What hope do I have?”
Well, the good news, as I learned, is that there are things that have worked consistently over decades, and doing them doesn't require billions of dollars, access to instantaneous market data, or a degree in finance.
In fact, the path to wealth is relatively simple (or within reach to say the least):
1. Pick the right markets (over the right stocks, funds, or managers)
2. Keep costs low (by using passive funds and trading minimally)
3. Diversify your portfolio to withstand shocks in the short to medium term (by investing in different asset classes)
4. Allocate in the right ratios
5. And most of all, stay invested over long periods of time
I say ‘simple’, but realize that for a lot of people, some of these things might not come naturally. So when I was conceptualizing our product, I knew I wanted to make steps 1 through 4 accessible and encourage step 5.
Everyone should have access to healthy wealth creation through the markets, and it shouldn’t take up an inordinate amount of their time.
