The Rubik’s Cube consists of many interconnected parts; One wrong step can take you back to square one. Investing is the same – myriad factors, such as inflation, currency, interest rates, company profits, company management, etc., impact investment success, and a wrong investment decision can lead to significant losses. No wonder people who crack the code, i.e. solve the cube or become successful investors, are put on a pedestal and considered geniuses.
Does this mean that if you are not talented, all your efforts at solving the cube or investing are in vain? Fortunately, no.
Here are some similarities I’ve realized between investing and solving a Rubik’s Cube:
Building muscle memory is essential to being successful: Practice. Practice. Practice. It will be almost impossible to solve the cube on your first try. You have to keep practicing, learning tricks along the way, and developing muscle memory so that it eventually falls into place.
Investing Worlds Parallel: The same principle applies to investing. Investors and advisors who invest for decades develop muscle memory that makes them better investors. Their expertise stems from having lived through similar trends multiple times over decades – and they can leverage this experience to cut through the noise when advising clients.
Rule-Based Approach: In the Rubik’s Cube field, there is a big difference between a structured approach – often called ‘algos’ – and haphazard, unregulated steps. Not surprisingly, the structured approach is the clear winner. These ‘algos’ provide a streamlined path, enabling rapid progress through the complexities of the cube and eliminating arduous backtracking. Over time, these algorithms become ingrained, eventually becoming second nature in solving the cube.
Laying the strategic foundation: Investment success also involves a series of processes with multiple checklists, protocols, and sub-activities that can institutionalize the investment process. Jumping or being disorganized between stairs is sure to spell disaster. Steps like creating a detailed plan or IPS (Investment Policy Statement), focusing on asset allocation, strategy around security selection, a strict review mechanism, and being cautious about costs, can form a foundation on which to build your investment success. can be done. For experienced advisors, these steps come almost naturally, almost like Rubik’s algos.
Role of enhancing imagination, innovation, and cutting edge
[ez-toc]
The record time for solving the cube has dropped from one month (1974) to 23 seconds (1982) and today’s world record is 3.13 seconds. This astonishing reduction in resolution time is due to intense innovation in three areas:
a) physical characteristics of the cube, e.g., drift, speed cubes, etc., b) worldwide acceptance and availability of resources and training, and c) intuition-driven speed-solving algos such as F2L, CFOP, and ZZ.
Transformative change: Concerning the investment landscape of India’s sophisticated investors, we are witnessing transformational change driven by innovation, deepening of the talent pool, and implementation of global best practices and supportive regulations. Consider this:
innovation: Innovations in products and platforms such as REITs, private equity, AIFs, large value funds (LVFs), HNIs, and UHNIs are expanding the investment landscape. Investors can choose from a wide range of portfolio managers, advisors, or distributors who are the ‘right fit’ for them. This rapid innovation is opening unprecedented opportunities for sophisticated investors.
talent pool: The IBC Code, RIA Regulations, and other enabling rules lower entry barriers for talented managers, provide a level playing field, and protect investors’ rights. This opens up a larger segment of the talent pool that sees investing as a viable career – leading to more innovation and better investment frameworks – a virtuous cycle!
Global Best Practices: India is adopting global best practices in mutual funds, PMS, AIF, and RIA regulations. Through the GIFT City initiative, we are becoming the preferred region for Indian investors to access foreign markets or for foreigners to invest in India. Not surprisingly, we are seeing ever-increasing inflows of financial investments from across the ecosystem, including mature investors such as family offices and institutions.
Although there is no hidden formula to master the game, following a consistent and disciplined approach can be the key to winning the cube and achieving the ultimate rewards in excelling in the art of investing.