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Sir Isaac Newton was one of the smartest people to ever live. Though he conceptualised the laws of motion & invented calculus, he wasn't a smart investor. Back in 1720, Newton owned shares in the South Sea Company, the hottest stock in England. Sensing the market getting out of hand, he sold the shares to make a 100% profit of £7,000. Months later, swept by market euphoria, Newton bought the shares again at a much higher price & lost £20,000 (about USD 4 million in current terms) when prices crashed. Newton was a cautious investor, as much of his money was invested in government bonds. But he got swayed by the irrationality of the crowd & converted the bonds into stock. He had a simple explanation for his lapse, “I can calculate the motion of heavenly bodies, but not the madness of people.”

Herd behaviour, which dominated the market 300 years ago continues even today & drives new investors to make a quick buck during market euphoria. When markets offer the temptation of ever-rising values, not even the smartest people, like Newton, can resist. Such return chasing behaviour (timing the market) may prove detrimental for most owing to which it is rightly said that ‘Past performance is no guarantee of future results.’ It is therefore important to chase goals & not returns. To lower the impact of sentiment, investors must use the discipline of SIPs & invest across market cycles in a diversified portfolio of stocks, asset classes & geographies over the long run. When Oscar Wilde said, ‘To do nothing at all is the most difficult thing in the world, the most difficult & the most intellectual,’ he was not referring to investing, but it applies equally well to investing.