Lessons From The Debt Fund Fall

  • Rule number minus one: Invest with a goal and time frame.  Rule number zero: Never forget rule number minus one. What WB said can wait.
  • There can be no free lunch: It goes against the rules of the universe. Returns may not be mathematically correlated to risk. However, there is no denying that ‘good returns’ implies risk. Simple commonsense.
  • Horses for courses. If you want ‘good returns’ you need to train for a marathon not for a sprint.
  • Ignore noise: Do not waste time reading every available analysis on why bonds crashed. The fundamental principles of sound investing will never change. Once you know what those are, the rest is just BS. The reasons for the crash are completely irrelevant if you get the basics right.
  • Never forget the tortoise and hare story:
    • Why did the hare run fast? Because it had not idea how the finish line looks and wanted to get there asap.
    • Why did the tortoise go slow? Two reasons
      • It had a good idea of how the finish line looks and knew how to pace itself.
      • It had a shell. Every time there is panic and unnecessary noise, it will withdraw into its shell.
  • Read the fine print. When an investment document says, “MF investments are subject to market risks” it actually means it! No one cares if you didn’t read it. No on cares about your interpretation of it.
  • Understand the gravity of a statement. When someone says, ‘liquid funds have the lowest risk among all debt funds’ it does not mean they have zero risk. Every investment vehicle has a purpose. If you don’t know what that it is, kick yourself in the butt.
  • Blame no one but yourself. Do not be shocked that you have lost money in a debt fund. Be shocked at your investment choices and thought process. Don’t the join the chorus of popular financial literacy magazines and blame AMCs, regulators and financial planner. Your loss is only your loss.

Let me conclude by misquoting George Santayana:

“Those who forget history are condemned to repeat it”


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