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The Only Investment Advice You Ever Need - Future IQ

6,979 views Wait, is this logic right? • Oct 24, 2025
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Slog Reference: FutureIQ's Investment Guide

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Most people think they’re smart investors, picking the right stocks, timing the market, and “beating the system.” But what if we told you that even monkeys throwing darts at a list of stocks would outperform most humans (and even many mutual fund managers)? In this episode of FutureIQ, we dive into the psychology, science, and cold hard data behind why the majority of investors actually lose money, not because they’re unlucky, but because their brains fool them. We’ll reveal the simple, scientific formula for investing that most people don’t want to hear, expose the myths around mutual funds, real estate, and gold, and show you the only kind of investment that consistently beats the odds. If you think you’re good at picking stocks - this episode might just change your mind.

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More Videos:
How To Choose An Insurance Plan?: https://youtu.be/WiWbgQA7vRM
Credit Card - Free Money Or Debt Trapped?: https://youtu.be/p6WHZHMLopo
Why We Only Hear About The Winners? Survivorship Bias Explained: https://youtu.be/QjDXyuBJ0UY
Sunk Cost Fallacy, Loss Aversion and Endowment Effect Explained with Examples: https://youtu.be/pgH79XsGlo4

Hope you enjoyed FutureIQ by Navin Kabra and Shrikant Joshi. Do hit us up on Twitter:
@ngkabra http://twitter.com/ngkabra
@shrikant https://twitter.com/shrikant

00:00 Introduction
01:13 Don't Pick Random Stocks
03:25 Scientific Thinking
04:16 Problem With Random Stock Picking
06:53 Put Your Money In Index Stocks
08:37 If A Monkey Can Do It, Why Can't We?
08:45 Monkey vs Human Investor
10:03 The Adverse Selection Trap
13:22 Why Index Funds Win
17:09 The Complete Investment Formula
20:27 Real Estate vs Stock Market
22:27 Gold, Derivatives & Insurance
26:46 Final Summary & Takeaway

Sources:
The Behaviour of individual investors: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1872211
Individual investors lose money because of their behaviour: https://www.dalbar.com/qaib/
Most mutual funds dont beat the index: https://www.spglobal.com/spdji/en/research-insights/spiva/
Most mutual funds don’t beat the index: https://cafemutual.com/news/industry/35917-73-of-indian-large-cap-and-82-of-mid-and-small-cap-funds-have-underperformed-sp-india-benchmarks-over-a-10-year-period
Monkeys throwing darts will beat mutual fund managers: https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
Buying 30 stocks is roughly equivalent to buying the whole market: https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6261.1968.tb00315.x
SEBI report, 89% of Individuals in Futures and Options lose money: https://www.sebi.gov.in/reports-and-statistics/research/jan-2023/study-analysis-of-profit-and-loss-of-individual-traders-dealing-in-equity-fando-segment_67525.html
How Jane Street made 4 billion dollars, largely off of daytraders in India : Planet Money by NPR: https://www.npr.org/2025/09/24/nx-s1-5551163/jane-street-billion-dollar-options-india
2 to 10% of your portfolio should be gold: https://www.gold.org/sites/default/files/documents/gold-investment-research/Gold_a_commodity_like_no_other.pdf

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Transcript

Investing in the stock market is easy if you know how to do it well. And yet most people do it wrong. And the bigger problem is that most people don't even realize that they are doing it wrong. So this episode is going to talk about the first principles of investing. By the end of the episode, we will give our uh formula, but you're probably not going to like it. Okay. Uh quick disclaimer, we are not financial experts. This is not financial advice. Please do not uh believe this as us advising you.
We are talking from the first principal lens as we've always done in future IQ. So do not uh come back to us saying you told us to do this and this did not work. No, that's not the intent of this episode. Another thing that I want to tell you is that we now have a WhatsApp community for future IQ where uh people uh have joined us and they are asking Navin some really interesting questions and I am enjoying learning a lot through those questions. So the QR code is up on your screen. Join us there. Talk to us.
Link is in the description if you don't want to scan a QR code or whatever it is. But please join us there and join the conversation because there are some really intelligent conversations happening there. And if you've already joined it, thank you for joining. Always a pleasure. Now Naveen you said most people do investment wrong and I point to you Rakkesh Junjunwala Warren Buffet Charlie most people are not Warren Buffet and Charlie Monger and Rakkesh Janjunwala fair okay so let's do this okay do you know people who invest in the stock market yes of course I do I'm also one of them yeah so do they pick individual stocks and when to buy them and when to sell
Yes, they do. And have they made like good money on their stocks picks? Yeah, they have fairly good amount of money. No, most likely they have lost money. But I know they've made money. I I've seen them making money. Okay, so this is one of those biases. Okay. Uh you know, let's say you have picked seven stocks, okay? And then four of them go up and at least one of them has gone up like crazy, right? Your brain wants to think of you as a genius, smarter than everybody else around you.
So it remembers these stocks that you have picked and made a lot of money on. Right. It conveniently forgets the three stocks that you lost money on. Yes. Okay. And very few people actually sit and make a very clear portfolio of exactly how much they invested when and what was the overall return of all their investments. Right. Right. Those are fund managers essentially. No, no, no. So there are individuals also. Most people don't do that. They sort of just know this stock did a lot and they feel happy about that.
There are a few who are going to put comments in here saying no no I keep track of everything. I think there are a few and they look at it and they see a return and you know like from 2012 to now it is like yeah I know people who have charted different prices at which they bought the stocks and that particular price increase or decrease or right so they have an overall return and you know like I said from 2012 to now they have 2.9 times return which is like you know uh 190% right they are forgetting the basic rule of future IQ right of scientific thinking.
Okay, wait. The basic rule of future IQ scientific thinking is what is the null hypothesis compared to what? Okay, what are they comparing to like keeping that money under the mattress? Yes. So, whatever return you get is good. Keeping it in an FD. Yeah. You got 6% in an FD whereas here you are getting 11%. That's a huge huge huge improvement. Nearly double. Yes. Yeah. That is the wrong comparison, right? They need to be comparing themselves to monkeys throwing darts at the stock market. Okay. Yeah, we've done this. We've we've we've had this example before where we compared picking stocks to monkeys throwing darts. Uh we'll put up a link to the episode. Go check it out later.
But basic idea is that even these people who got a 11% return and who got you know uh 10 lakh became 30 lakhs whatever right? they are probably doing worse than those monkeys. Okay. Uh it's a hypothesis that can be tested although I don't think it has been tested lots of times. Okay. Tested but I'm still trying to make sense of all of this. I mean I understand the null hypothesis right? You have to keep in mind the fact that when a country is doing well economically right there is growth right? We talk about India has like 5% growth, 6% growth and all that and add some inflation to that and so the overall stock market of the country
keeps going up regularly right which means that if you somehow manage to invest in the entire stock market you would get that return correct right and in the last say 7 8 years or 10 years the stock market has as a overall thing has done very well really Okay, that is part one of the point. The part two of the point is that there is data I mean there is you know simulations and other stuff showing mathematically that if you randomly pick any 30 stocks okay fully randomly those 30 stocks will have roughly the same return as the entire market.
Any 30 stocks. Yeah. Because see this is the law of large numbers right as in you will I mean you randomly throws and you will pick some losers and some winners to some extent right see because here is the thing right if somebody is dumb right just like they can't pick the best performing stocks similarly they can't pick the worst stocks because it's a random chance of picking both kinds of stocks correct because if somebody was so bad, so bad that they always picked the stocks that are going to do the worst, you could use that to make a lot of money by just shorting those stocks.
Okay? So, no, you are not in that category. You I mean, however dumb you are, you will just lose a small amount of money. You can't lose large amounts of money on the stock market. Fair because of the randomness. But coming back right if you pick 30 stocks at random the returns on those 30 will pretty much be similar to returns on the entire stock market. Okay. Now what that means is that if you go and actively pick stocks okay you have to compare it to the overall stock market.
Correct. Or to monkeys throwing darts and picking 30 stocks at random. Correct. Both of those are a little difficult to do but there is an easier way to do pretty much the same thing which is which is the index right BSE Sensex or the Nifty50 right correct those have been picked by very smart people to sort of capture the overall sentiment of the market sentiment of the market so if you invest in just those 30 index stocks index stocks you will get the same return as the stock market and you You don't have to be clever. You don't have to time it perfectly. You don't have to do anything. You just put it there, forget about it and look at it
12 years later. But I also still have to make sure that the percentages of stocks that I own should match the percentage. We will come to that. Okay. Just right now theory we are doing the compared to what null hypothesis is that not that you put money in an FD, right? Null hypothesis is that you put it in the entire stock market or you put it in an index. Got it. Got it. And then compare what you got against this null hypothesis. Right. Got it. So even without the simple null hypothesis is that if you started investing say in 2015, look at what the Nifty50 was or VS Sensex was at on 2015 and now if you
look at your overall return today, look at where the Sensex has reached. So you have to compare with the sensex right and only then when you beat the sensex can you say that you understand the market and therefore understand investing. Yeah. But then comparing to the monkeys uh if a dumb monkey can do it why isn't it possible that a human can do it like I can do it. Yeah. See I mean basically what you are saying is the following right there is a human who thinks he's extra smart but he's actually dumb. So his picks should be random just like the monkey.
Yeah. And so he should get the same return as the sensex pretty much. Problem is twofold, right? One is that the human tries to be intelligent instead of trying to be dumb. The monkey picks a stock and then sticks with it for 10 years. Right? A human does not do that. A human wants to go and oh my god let me do this, let me do that. Buying and selling. You are losing money on the transaction cost. You're losing money on the capital gains. If you're doing short-term capital gains, then it is much worse.
That's part one. Part two is that humans are emotional. Okay? They buy when the stock market is going up. Oh, market is going up. Awesome. We should get into the market, which is exactly the wrong time to buy. And then when there is a crash, they say, "Oh, [ __ ] I'm going to lose all my money. I should sell." It's exactly the wrong time to sell. So the ones trying to be intelligent actually are doing worse than just double luck worse than monkey. Some level of Dunning Kruger effect happening here. Absolutely see.
But then what about the people who actually are looking at the market in very very micro lenses like looking at the fundamentals of a company the P ratios. Okay. Basically let's imagine not the dumb guys who just looked at some WhatsApp and uh message and decided to invest, right? Let's say there are people who are studying what what is in the news and what are the fundamentals and Reliance got so and so contract and based on that that person decides that I want to buy Reliance at 1,400 rupees because I think it is going to go up right so you go ahead and you buy 100 shares of Reliance right okay that means that somebody sold 100 shares
of Reliance at 1400 point right All transactions in the stock market happen because one person bought, there was a different person who sold and vice versa. Correct? Okay. Now, here is a question. Who do you think sold it to? And is that person smarter than you or dumber than you? Wow. Okay. That's okay. Did you ever think about that? I I I haven't consciously thought about it but now are majority of the time the person selling it to you is a manager at an institutional investor. What that means is that it's either a manager of a mutual fund or manager of an insurance company's money portfolio or somebody who's managing a fund essentially somebody who's managing lots
of I know you think of yourself as very great because you're looking at all the micro this of reliance and all that that guy studied 10 years doing that and he spent 60 hours a week doing just this and if he does this wrong he gets fired. Okay, that's his full-time job. That's his career. That's his background. And you are a voice artist. Who do you think is going to make this decision better? Excuse me. Content strategist and consultant, not just voice artist. But yeah, you are right.
Who is going to make that decision better? Right. This in finance is called adverse selection. Okay. Right. So yes, there are a few people who are so smart that they can look at things, pick up the right fundamentals and then invest and do a really good job, right? But always remember you are competing with that guy and most people are not good at competing with that guy. True. True. Most people are not good at competing at that guy. But what people can be good at, I'm not saying they're necessarily good at it.
What people can be good at is throwing darts. and selecting stocks at random. So basically, so what you're saying is that if people are emotional and they choose wrong, then they would be better off throwing darts. Yeah. And picking at random, right? Because that is mathematically proven. In theory, that is correct. Okay. But it is really difficult for people to throw at random. Okay, humans are bad at being random. Okay, that is also a proven fact. We'll talk about it some other day. Right. But here is a better strategy of doing the same thing. Right?
You know about the indexes. Yeah. Right. There are index funds. Yes. Okay. So what is an index fund? It's a mutual fund where the manager of that mutual fund does not go around thinking of which stock to buy and which to sell. Right. The manager all the manager is supposed to do is look at the content of the index and buy those many stocks. Right? Over time, the content of the index can change once in a while. It's rare. Uh the ratio in which you're supposed to hold the stocks can change a little bit because if this company became more important, you can reduce or increase its uh allocation.
Basically, the index publishes how it calculates. So on the basis of that uh those numbers you essentially mirror those numbers in your fund. There is no strategy required there. It's just maths, right? Not even maths. Just you know just look there and implement here. Now in a mutual fund what happens a real mutual fund where there is this really highly paid very smart manager choosing right that guy gets paid a lot of money right and plus they have a whole bunch of things right they have to run ads on TV that money has to come from somewhere so a mutual fund charges you some annual management fee right that's usually in the 1 to 2% current right
so no matter how the mutual fund does every year they take away 2% of your money, right? So you're already down 2% of your invest. So even if the mutual fund was able to match the market, they're 2% down because of this and add in the transaction fees, add in the taxes and you can see the trouble, right? Yeah. With an index fund, this is not a problem, right? One, they don't have to pay a highly paid manager, right? I mean it's just I mean you know some intern looking at what the index should contain and matching it matching it right can be a fairly low-level person and second is because the index changes very rarely there
isn't much in terms of transaction cost and there isn't much in terms of capital gains yeah you can rebalance every quarter even if you want to do it yourself you can technically do it without paying without having it done by an intern at some mutual fund organization I understand all right but then there has been this entire marketing blitz about you know mutual funds and in some way it also makes sense for me that I will give someone the money and let them manage what stocks to pick what not to pick through mutual funds through whatever and so that I can hold their collar and say I give you money now give me returns yes so first of all you are not in a
position to hold anybody's caller right if a mutual fund doesn't give you money you just deal with it There's a bigger problem here, right? Uh first of all, mutual fund is actually okay because compared to what right for the people we talked about at the beginning of the episode, the ones who are putting their money in individual stocks, they would definitely be better off putting money in a mutual fund. Correct? But compared to an index fund, a mutual fund is not good because there have been enough studies showing that most mutual funds are unable to beat the index fund.
Right? Because we talked about the reasons be uh earlier. They have to take out the 2% management fees. They have to deal with the capital gain taxes. And no matter how well paid a manager is, there is a good chance that they're not able to beat the market. Right. Yeah. and beating the market. Uh rather than beating the market, probably look at uh just following the market, go into an index fund. So are you now saying that just take your money and put it in an index fund. Take all your money, put it in an index fund.
No. Okay. What I'm saying is all the money that you want to invest in equity that should go in an index fund. But that sentence needs some unfolding, right? Because all the money that you have that you want to save that actually needs to be split into two parts right one part is the money that you need soon and by soon in this context I mean next 3 to 5 years right you can sort of guess the money you're going to need in the next uh 3 to 5 years right that oh you want to buy a vehicle next year you there is some fees for going abroad to study in 2 years whatever all that money right that you
have to put in debt. Okay, a debt means two different things. One is FDS, right? Or it could be money market fund. A money market fund is pretty much FDS, but you keep it with a company. So, you get a slightly higher return, but there is a slightly higher chance of a default because it's a company and not a bank, which is regulated by the RBI and all of But you know just like equity they create a mutual fund of corporate bonds which is a pretty safe way of keeping your money in debt right essentially the money that you need in the next 3 to 5 years make sure that it is easily and quickly and guaranteed
accessible back correct basically that money does not lose its principle okay right whereas if you put money in equity right now there's a good chance that you know one and a half years from now stock market is minus 30% and at that time if you have to withdraw money to pay for your new vehicle, right? You have to liquidate your stocks at a time when you are minus 30%. That would be really bad for you, right? But money that you know you don't need for 5 years or more. That much just don't worry about it. Put it in a stock market. put it in an index fund and then you know you can take it out like seven
years later, eight years later and almost certain that the return you get on that will be better than the return you would have gotten if you had tried investing in individual stocks yourself. I am still hung up on the stock market going 30% down in one and a half years. It's a scary thought uh because I even if I invest in an index fund somewhere at the back of my mind if I see the stock market going down I'm also seeing the index fund going down.
That is part two of the future IQ advice. Mhm. Do not look at the stock market. You know do better things with your life. Have fun. Watch movies. Dance. Okay. Go bowling. Okay. Don't look at the stock market. Bowling in Pune. Okay. Now I was thinking more along the lines of sos fallacy in the sense key when I look at the stock market going down down down say I have invested at the peak of the market and now the market is going down. So at some point the you don't you don't need this money for 5 years. In 5 years it will go up.
Okay. Right. So don't worry. Okay. So I will trust you on that that even if it goes down in the next one and a half years don't think about that. Think of 5 years 7 years 8 years 10 years whatever. Uh but that's okay. Is that the only investment? Because I've seen people investing in real estate, in gold, in a lot of other Let's take them one by one. Okay. Okay. Real estate. Someone I know sold a plot of land for 96 lakhs. Wow. They had bought it for 30 lakh in 2012.
That's about uh insane return, right? No, wait. 30 lakhs. 12 years 96. Yeah. So 30 lakhs. Now that I'm thinking of the stock market, I'm thinking if I had invested 30 lakhs in the stock market in 2012, what would that have been? 130 lakhs. Right? So they were extremely happy that their 30 lakh became 96 lakh. They didn't realize that if that same 30 lakh they had put in Sensex, it would be 130 lakh. Okay. So everybody who's so excited about real estate has a story like this, right? Yeah. Of course, every once in a while, what happens is that one particular area of town suddenly goes up like crazy, right? And you make a ton of money, much much more than the
stock market. But then that same thing will not shift for the next 10 years, 12 years, whatever, right? In the long term, real estate makes sense to buy if you're going to use it, right? Your home, if you're going to live in it, buy that. Anything else is just a headache, right? because real estate the prices don't go up as much as the stock market if you look at the average unless you're going to get lucky. Uh second is that there are all kinds of issues you have to deal with including encroachments and uh you know forget title clear and yeah I mean forget all of the legalities of it just the maintenance of buying a
real estate property or investment is itself another cause that most people don't think about. So I agree with you when you say that people should be thinking of real estate as something that they use that they consume that they utilize and not as something that will appreciate in a certain way. Correct? It does appreciate in certain cases but a lot of them can be thought of as edge cases. Right. But there is one asset that has consistently appreciated since my childhood I've seen it appreciate which is gold.
No it hasn't consistently appreciated. Okay. I mean gold sometimes appreciates like crazy. Right now is a time when it has gone up like crazy. Nobody knows why. Okay, because there isn't that much of a theory around gold. But there have been times where gold has significantly underperformed the market. Okay, in fact until last year the theory was that gold moves opposite to the stock market. So when stock market is doing well, gold will do badly and vice versa. So having some gold is a good thing because if you're doing badly in the stock market at least your gold has value, right? So yeah, it makes it sorry it makes sense because uh if the stock market is doing
well, people are probably selling their gold stores to fund their investments in the stock market and all of that makes sense. So uh you know the theory pretty much says that about 5 to 10% of your long-term savings should be in gold. That's a good idea. uh and you know if you're an Indian household and you already bought a lot of jewelry maybe that is already taken care of right right uh but if not it makes sense but also right now right last one year nobody understands what happened to gold because stock market is also up gold is also up who knows what's going on there I do have a theory about that I have
heard something but I haven't read much about it we'll talk about it off camera in a different one of the other things that we do u but yeah uh there There is also a second layer of stock market that I'm suddenly remembering which is derivatives trading which is options your futures and all of that. Do not touch options and futures. Okay. I told you that when you're doing individual stocks you are competing against a mutual fund manager. Right? If you are doing options and futures you are competing against the smartest people in the world. Right? the toppers at the IITs and the uh Stanford and Harvard and all those toppers get hired by companies like Jane Street and all
day long the smartest people in the world are thinking of ways to fleece you in options and futures. There is zero chance that you can make money on options and futures. Okay, do not just stay away and look up Jane Street news recently if you are interested. I was about to talk about Jane Street for the same reason. There is again a very brilliant episode of Planet Money uh on Jane Street and how Jane Street used something called um arbitrage in a geographical sense to make that money and how they actually may have crossed certain ethical, moral, legal boundaries while doing so. I'll put the link in the description for you. But uh he he is
right that you are competing against some of the brightest minds who are sitting there essentially to uh get that uh money from you. Yeah. Right. Um wow. There one more area of investment that people do wrongly which is is insurance come investment. But we've already spoken about that in an episode where we did correct about what insurance to buy. Right. So just letting you know in case you didn't watch that episode is do not combine investment with insurance, right? Your insurance should be for insurance. So just buy term life insurance which returns you zero money if you didn't die. Okay? Because any attempt at combining insurance with investment that oh if I put it here then
at the end if I don't die I will get so much money is a bad investment. you are going to get less. It is better to just take term life insurance and pay a very small premium and all the money that you saved put it in an index fund. Yeah, if I remember that episode correctly, you basically said that that purchase of insurance is not an investment, it's a purchase. You're spending there. So, think of it as spending and not as investment. We'll line up that episode for you. Go definitely check that out. But conversations about this will continue in the future IQ community, the WhatsApp community that we are talking about. So do join us there. I'm giving you another
reminder. We'll put up the QR code on the screen, link is in the description, etc., etc. But quickly Naven to summarize this whole conversation, what would you say people should do with their savings? And I'm not just talking investment money, I'm talking savings. Yeah. So any money needed in the next 3 to 5 years, put it in FDS or something similar. Right? If you know what money market funds are, do that. Okay? Any money not needed for 5 years or more, dump it in an index fund and then do not look at the stock market. Do not look at it. Nothing. Right.
Right. And that's it. Forget about it. No real estate, no gold unless you want to live in a house or want to buy jewelry for an upcoming wedding. Correct. The only other thing to keep in mind is that every once in a while you have to recalculate what money you're going to need in 3 to 5 years, right? Because 3 to 5 years keeps changing. And whenever that changes, when you realize, oh, I'm going to need some more money, then you move some money from equity from the index fund into your FDAs so that it's there, right? There's also uh stuff like PPF and uh NPS that we haven't spoken about but I guess that's a conversation for
off the camera and for the WhatsApp community. So do meet us there. Meanwhile, I will ruminate on uh these investment first principles from future IQ that we have just presented. Shriant Naven Future IQ