For the past month, my 6-year-old son and I have been learning how to solve a Rubik's Cube. So here's something that got me thinking. Similar to navigating the complexities of investing, solving a Rubik's Cube is incredibly difficult. There are 43 quintillion combinations in this cube, and if you stare long enough, you'll notice a mind-boggling sight. Similarly, even investors with several years of experience and expertise find it difficult to invest.
A Rubik's Cube has multiple interconnected parts. One wrong move could send you back to square one. The same goes for investing. A myriad of factors such as inflation, currency, interest rates, corporate profits, and corporate management determine investment success, and one wrong investment decision can lead to significant losses. It's no wonder that those who crack the code, that is, those who solve the cube or become successful investors, are exalted and treated as geniuses.
Does this mean that unless you are a genius, all your attempts to solve or invest the cube will be in vain? Fortunately, it is not.
There are some similarities I thought between investing and solving a Rubik's Cube.
Building muscle memory is essential to success. Practice. Practice. Practice. Solving the cube on the first try is almost impossible. You have to keep practicing, learning tricks along the way, and building muscle memory so that eventually it sticks.
Parallels in the investment world: The same principle applies to investing. Investors and advisors who spend decades investing develop muscle memory that makes them better investors. Their expertise comes from experiencing similar trends over and over again over decades, and they are able to use this experience to distill through the noise while advising their clients. .
Rule-based approach: In the realm of Rubik's cubes, there is a sharp contrast between structured approaches, often referred to as “algos,” and haphazard, irregular steps. Naturally, a structured approach is the clear winner. These “algos” provide a streamlined path, allowing you to quickly process cube complexity and eliminate tedious backtracking. Over time, these algorithms become ingrained and eventually become second nature when solving cubes.
Building a strategic foundation: Successful investing also requires a set of processes that include multiple checklists, protocols, and sub-activities that can institutionalize the investment process. If you jump over a step or act haphazardly, disaster will ensue. Steps such as asset allocation, stock selection strategies, rigorous review mechanisms, focus on cost vigilance, and the creation of detailed plans and IPSs (Investment Policy Statements) form the foundation for building investment success. can. For experienced advisors, these steps come naturally, almost like a Rubik's Algo.
The role of honing imagination, innovation, and cutting-edge technology
The record time to solve a cube has decreased from 1 month (1974) to 23 seconds (1982), and today's world record is 3.13 seconds. This incredible reduction in resolution time is due to his significant innovations in three areas:
a) physical attributes of the cube (drift, speed cube, etc.), b) availability of globally accepted resources and training, and c) intuition-driven speed solving algorithms such as F2L, CFOP, and ZZ.
Transformative shift: When it comes to the investment landscape for India's sophisticated investors, we are witnessing transformative changes driven by innovation, deepening of the talent pool, and the introduction of global best practices and supportive regulations. Consider this:
innovation: Innovations in products and platforms such as REITs, private equity, AIFs, and large value funds (LVFs) are expanding the investment landscape for HNIs and UHNIs. Investors can choose from a wide range of portfolio managers, advisors and distributors to find the 'right fit' for them. This rapid innovation is opening up incredible opportunities for sophisticated investors.
Talent pool: Enabling regulations such as the IBC Code and the RIA Regulations lower barriers to entry for talented managers, create a level playing field, and protect investor rights. This opens up a large portion of the talent pool that sees investing as a viable career, creating a virtuous cycle that leads to greater innovation and better investment frameworks.
Global best practices: India has adopted global best practices across mutual fund, PMS, AIF and RIA regulations. Through the GIFT City initiative, India is becoming the jurisdiction of choice, both for Indian investors to access overseas markets or for foreigners to invest in India. Not surprisingly, we continue to see increasing inflows into financial investments from across the ecosystem, including mature investors such as family offices and institutions.
There is no hidden formula to mastering the game, but following a consistent and disciplined approach is the key to conquering the cube and winning the ultimate prize in terms of excellence in the art of investing.
Himadri Chatterjee, Head of Advisory and Key Account Group, 360 ONE Wealth
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