10 Investing Lessons This Diwali
True wealth comes from patient, disciplined investing and preserving money, not flashy moves.
1. Don’t Follow the Crowd
• The rise of social media has turned investing into a trend game.
• As Frederick Allen Lewis noted: “Follow the crowd, take up the new toys that were amusing the crowd.”
• Real investors avoid short-lived fads like futures, options, crypto, and gold rushes.
• Focus on timeless principles, not trending narratives.
2. Boring is Good
• Constant activity doesn’t equal better investing.
• Being busy with your money — trading, switching funds, or reacting to news — rarely improves returns.
• Patient investing, reviewing occasionally, and staying consistent often beat hyperactive strategies.
3. Balance Safety and Growth Across Assets
• Fixed deposits, provident funds, and government-backed schemes provide safety and steady returns.
• But relying only on them may not outpace inflation or create long-term wealth.
• Combine them with mutual funds, equity, bonds, and index funds suited to your risk tolerance.
• The goal: protect capital while enabling sensible growth through diversification.
4. Focus on Return of Capital, Not Just Return on Capital
• As Peter Lynch said, “Return of capital is more important than return on capital.”
• Protecting your money matters more than chasing high returns.
• Avoiding large losses ensures you stay in the game long enough for compounding to work.
5. Understand Investor Psychology
• Emotions and biases shape investment outcomes:
• Herd mentality, following trends blindly.
• Overconfidence, mistaking luck for skill.
• Loss aversion, clinging to losers to avoid admitting mistakes.
• Awareness of these biases is as important as financial knowledge.
6. The Power of Boring Compounding
• True wealth builds quietly over decades.
• Compounding rewards patience and consistency, not excitement.
• Avoid get-rich-quick promises — slow, steady growth wins every time.
7. Beware the Illusion of Expertise
• Many “experts” — fund managers, advisors, TV analysts — sound confident but may not outperform simple index investing.
• Their incentives often come from commissions or client activity, not your financial success.
• Always verify advice and understand how the recommender benefits.
8. Know the Limits of Knowledge
• Even seasoned investors can’t predict the future.
• As John Kenneth Galbraith said: “In the financial world, the man who claims certainty is either kidding himself or trying to kid you.”
• True confidence lies in accepting uncertainty and staying diversified.
9. Experience Shapes Perception
• People base investment opinions on their own experiences.
• Just because you haven’t seen a risk doesn’t mean it doesn’t exist.
• Learn from others’ experiences, especially past crises, to recognize hidden risks before they surface.
10. Be Optimistic, Not Overconfident
• Optimism fuels investing; overconfidence destroys it.
• Overconfidence leads to speculation and bubbles, often hyped by influencers.
• Stay humble, stay analytical, and let discipline guide you, not excitement.
☘️ True wealth is built through patience, discipline, and capital preservation, not flashy moves. ☘️