We are sure you already know what noise-cancelling headphones are. They are headphones that cut out the unwanted ambient sounds around you. Ambient sounds tend to disturb you and can spoil your music-listening experience. When you listen to your favourite music without any distortions, you can focus on the beats, the tunes and the lyrics in an enjoyable and meaningful manner. People also often use noise-cancelling headphones in office to concentrate on their work.
That boring paragraph notwithstanding, this, of course, isn't an advertisement for noise-cancelling headphones. Unlike what the title says, putting on a pair of noise-cancelling headphones won't make you a better investor either. But what will make you a better investor is actually cancelling out the noise around your investments.
Ignore the noise
When it comes to your investments, the noise is the continuous barrage of investment advice and expert opinions that you come across. There is something or the other in the newspapers every day. Turn on the television and you'll come across experts voicing their opinions on how to invest and where to invest in the current scenario. The noise is even greater on the web. There is a plethora of blogs and websites that give out investment advice.
To be a successful investor, you need to just stay on course, continue investing and ride out the short-term gyrations of the stock markets.
Now, we have nothing against investment advice. We give that out too. It is important to listen to what experts have to say, but for most long-term investors, too much of it can be detrimental to their investments. Investment advice is also often filled with jargon. If you invest in mutual funds, you'll come across expert advice on reducing weightage to certain sectors, advice on investing in funds like ETFs that rarely get any mention, advice with terms like "skewed valuations", "market macros", "bottom-up analysis", "top-down investing", and what not. For most long-term investors, there is little need to get deep into all of this. You pay fund management fees so that the fund manager and his or her team can take care of these nitty-gritties. All of the jargon and analysis-based opinions that you come across are mostly just noise.
Focus on your goals
So, what should you do? Instead of reading everything that is written about how and where to invest, you should cancel out the noise as much as you can and focus on your own investment goals and objectives. Let's say you're investing systematically in a multi-cap equity fund for a period of 10 years to pay for your daughter's college education. You've chosen a good fund, you've started an SIP and you've established a long-term horizon. You have the basics in place. So do you need to listen to investment advice on what to do right now when the markets are at an all-time high? No, not really.
The stock markets go up and down over the short-term. But when you are investing for many years, you don't need to worry about the short-term volatility. Sometimes there will be a bull run, sometimes a bear phase. But over the long-term, systematic investments in well-performing funds always give good returns. You should just check the performance of your mutual funds periodically—once or twice a year—and make changes if any of your fund underperforms over a prolonged period of time or if your goal changes.
To be a successful investor, you need to just stay on course, continue investing and ride out the short-term gyrations of the stock markets. So, put on your noise-cancelling headphones and focus on your goals—it's all you need to do.