4 P's for successful Mutual Fund Investing

Posted On Wednesday, Nov 05, 2014


One of the interesting queries that came in for our Path to Profit event held in Mumbai last weekend was, “Why are all investors not successful? What special traits do successful investors have that help them succeed?” True, this is a question worth mulling over. How are successful investors, who go on to create wealth, different from the rest (apart from the fact that they are successful!)?

According to us, successful investors seem to have at least 4 Ps in common. And the best part is each of us can gain these 4 vital Ps, with some determination.


Those who are financially successful and wealthy have sound financial education. There may be no school or university offering financial education as a study course yet we can all acquire it easily. Yes, it does not take sophistication or an IQ of 150. All it requires is investment of some time to read about basic principles like saving, investing, risk, insurance, compounding.

“Don’t invest in something you don’t understand”, many a well-meaning financial planner tells their clients, which is a good piece of advice indeed. If you cannot tell how the investment will make money, what your risks are, it is better to invest time and understand it first.

However at the extreme end of this are investors who dismiss investments in anything other than traditional products (read FDs, physical gold), because they do not understand them; often because they have certain preconceptions and have not tried to understand them.

Broadly a financially educated person would have an understanding of principles like –
• How shares, bonds, mutual funds make money
• The difference between bad debt and good debt that creates assets
• Why asset allocation & diversification are important
• The need to have adequate insurance (even before launching into investments)

Financial education is a key requirement to build wealth as it enables a person to make sound financial decisions.


The second vital element common in all successful investors is that they have a plan. The choice of asset class and financial product, duration of investment, amount of investment is all driven by the goal. Nothing is ad-hoc. The good thing about having a plan and sticking to it is it helps beat fear and greed, which as human beings might occur to us naturally. Of course, yet plans ought to be flexible enough to make room for new developments.

Planning for investments includes saving adequately in order to invest. Many find this crucial step a challenge. For them it might help to start viewing investments as an “expense” you cannot skip.


One of the successful investors of our time once said that stock markets are a mechanism that moves money from the active participants to the patient ones. Think about that! It’s not frequent trading that helps investors make profits rather it is choosing investments with conviction and staying with them a long time.

Once there is a plan to follow, some of your investments might be categorized as short term requirement (the type for which you might choose a liquid fund), medium term (multi asset fund, bond fund) and long term (equity funds). Successful investors are disciplined and patient with their investments chosen carefully.They would not redeem prematurely, like today on November 5th, 2014, when the market hit its all-time high of 27,915 or extend their original holding period, to get more returns, even when the markets seem to be in a continued bull phase.


There is no teacher like experience. No matter how well-versed one is with the theories, practical experience can throw up something totally unexpected and teach a new lesson.

Even the best of investors can commit mistakes. Even while they act in the best of their knowledge they might come across failures. But they do not let failures frustrate them. Instead they learn from them and get better every time.

Ask any of your favourite investment wizards; each would have a tale of failure to narrate, from which they learnt. But each experience does not have to be first-hand! We can learn from the experience of others, we can learn from the past.

Like the saying goes, “practice makes a man perfect”; well if not perfect it would make an investor better for sure!

Get the learning, follow a plan, be patient and keep practicing it; you would be on the path to building wealth for yourself and your family. In addition, you should take the assistance of a financial adviser to coach you.

Disclaimer, Statutory Details & Risk Factors:
The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors.

Above article is authored by Quantum.

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