We are often taught to think big in life. We have always been coached – think big and achieve success; think small and you are doomed. Of course, thinking big helps in setting ourselves a high standard for excellence. However, it is the small and numerous steps that we take in the right direction that help us achieve most goals in life. Investing goals are no different, where aiming for consistency scores over aiming for perfection.

Consistency Vs Perfection

Chasing perfection is a pressurizing job with odds stacked against you most of the time. Traditionally, we all are taught to be the best in what we do. Though there is nothing wrong with it, there is a wiser alternative – Consistency. The difference between the best athletes and everyone else is that they are consistent. It comes down to who can handle the boredom of doing the same thing every day over & over.

Chasing perfection in investing

• I have to find best stock in large caps.
• Let’s buy equities at lows and sell at highs.
• Is it the right time to invest in crypto currency?
• I hope the stock tip proves to be right.
• The IPO looks best to make money on listing.

VS

Chasing consistency in investing

• Increase the SIP amount by 10% every year
• I wish to increase my equity asset allocation from 10% to 30% steadily over 2 years.
• I have started my first job. Let me also start the saving habit.
• Learning the concepts in investing – a page a day.
• I will reduce my debt to zero over the next 3 years.

 

How to achieve consistency in investing?

Markets oscillate between high (overvalued) and low (undervalued) levels from time to time.

In the long term, equities generally tend to go up

(represented by the average line in the graph below).

Solution 1 - Start with an SIP

• You can ride through the market fluctuations.
• Investing becomes a habit.
• With SIP, you master consistency!

How Equities behave?

Markets oscillate between high (overvalued) and low (undervalued) levels from time to time.

What you can achieve with Consistency?

Solution 2 - Small steps towards your target... Systematic Transfer Plan

What if your ideal allocation to equities as per your advisor is 40% and you are currently at 10%?

Would you,

(a) Change the asset allocation towards equity right away... don’t wait to do the required things

OR

​​​​(b) Make small changes over time on a consistent basis

Here too, the small changes could score over sweeping changes to your portfolio.

A Systematic Transfer Plan could come in handy and could do well to guard you against emotional decision making.

Solution 3 - SIP Top Up: How a small change can have a big impact

The below illustration explains how topping up your SIP yearly by 10% can have a huge impact on your wealth as against continuing with the same SIP amount for 20 years.

SIP Top Up by 10% Vs Normal SIP for 20 years:

This is just an illustration to explain the power of compounding.

You can make 3 Small Changes

that could help in building wealth over the long term…

• Save a little more every month - Set yourself up for financial freedom.
• Add a little equity – Could give a boost to your long-term returns.
• Start a little early – More years to compound your wealth

With a little change…

This is just an illustration to explain the power of compounding.

Yes, with a little change you could create Magic!

However, consistency is what you need if you are after long term outcomes. The results of consistency are not visible in days or weeks, but seen over many years. Every sports champion, every school topper and every successful long-term investor knows this secret. Once armed with the habit of chasing consistency, we don’t need to be the smartest of the lot.

Disclaimer: HDFC Mutual Fund/HDFC AMC is not indicating or guaranteeing returns on any investments. Investors should seek professional advice before taking any investment related decisions.

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