The Deadly Sins of Investing

(This column was first published on Value Research India.) The seven deadly sins were introduced by the Catholic Church during early Christian times, times that can today be best described as ‘a very long time back’. I’m not much of a religious researcher, in fact, I’m not one at all, and so I wouldn’t dare hazard a guess about any Christian doctrines that have stood the test of time, especially not in this “easily offended” era. But I can safely say that the seven deadly sins have. They’ve become pop culture references over the years. But, do they have an investment perspective? That is what’s important to us over here, after all. I believe some of them do make sense as far as investments are concerned, albeit not all of them. For example, let’s take the most famous of these sins – lust. Lust has nothing to do with investments in any way. Neither do pride, wrath and envy. Sure, you shouldn’t be proud of your investment values, you shouldn’t take investment decisions out of vindictive anger, and you shouldn’t feel jealous about how someone else’s investments are doing. And of course, you shouldn’t lust after investments either, but that doesn’t need to be said, does it? Anyway, that’s four of the seven deadly sins out of the way. But the three that remain – greed, gluttony and sloth – can prove to be more fatal for your investments than the seven combined in other spheres of life. Greed can have the worst consequences on your investments. More so in times like these when the markets are periodically touching new highs and are expected to do so over the coming few years as well. It’s easy to want more, even if you’re already sitting on hefty gains. But the trick to fulfilling your goals is to avoid getting greedy, especially when you are a year or two away from whatever purpose you need your money for. Keep your greed at bay and start redeeming gradually. After all, you don’t want to be faced with a market decline just when you need the invested money. Another thing you don’t want to face is the aftereffects of gluttony and sloth with your investments. Gluttony in the sense that you invest in more funds or stocks than you need. Investors tend to think that more funds means better diversification, but that’s not always true. Having too many funds of the same type will only lead to a concentrated portfolio and headaches when you have to manage it. As far as sloth is concerned, you don’t want to invest in something and get lazy about keeping track of it. Investing and forgetting is a folly. A periodic check helps you evaluate your investments and take necessary actions if required. Whether you commit these seven deadly sins in your life or not is for you to decide, but not committing greed, gluttony and sloth with your investments is something I’d strongly recommend. Amen!

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