The perfect start

There’s a peculiar obsession in the investment world with finding the
perfect fund. Browse any financial forum, and you’ll see endless debates
over the highest returns, lowest volatility, or smartest strategy. As if
identifying the mathematically optimal choice guarantees success. It’s an
understandable mindset, but it misses the most crucial element of long-term
wealth creation: staying invested. This month’s cover story tackles a
question that seems almost heretical in our returns-obsessed culture: What
if the best starter fund isn’t the one with the best track record? What if,
for new investors, the optimal choice is actually suboptimal? The answer
lies in understanding that investing is as much a psychological exercise as
it is a financial one. The human brain isn’t wired for the market’s rhythm.
We’re programmed to flee danger, and a portfolio dropping 15 per cent feels
exactly that. This isn’t a character flaw; it’s evolution. Our ancestors
who panicked at the first sign of trouble lived to see another day. But in
investing, this same instinct becomes destructive. The biggest enemy of
compounding isn’t volatility; it’s the investor who quits too soon.
Consider the typical journey of a new equity investor. They begin with
enthusiasm, armed with stories of market legends and compounding charts.
Then comes their first serious correction. Suddenly, logic collides with
panic as they watch months of SIPs vanish. That first scar is hard to heal.
Many never recover. This is why the question of starter funds matters more
than most realise. It’s not about chasing the highest returns over the next
decade. It’s about choosing an investment that lets a newcomer experience
market cycles without developing a fear of equity investing. Think of it as
inoculation, a vaccine, rather than optimisation. This is where balanced
advantage funds, despite moderate returns, make sense as training wheels
for equity investing. They don’t eliminate volatility; that would defeat
the point. But they soften the blows just enough to make corrections
educational, not traumatic. A 6 per cent decline instead of 15 per cent can
teach the same lesson, minus the panic that derails long-term investors
from equity investing permanently. The beauty of this approach becomes
apparent over time. An investor who starts with a moderate fund and
gradually moves towards pure equity has experienced the full emotional
spectrum of market participation. Compare this with the investor who begins
with aggressive equity exposure. If they’re lucky enough to start during a
bull market, they might develop unrealistic expectations about investment
returns. If they’re unlucky enough to start during a correction, they might
abandon equity investing altogether. Either outcome results in a poor
long-term outcome. The lesson extends beyond fund selection. In a world
obsessed with optimisation, we often forget that the best solution isn’t
always the one that looks best on paper. Sometimes, the most effective
approach is the one that accounts for human nature rather than fighting
against it. The investment industry does a disservice when it presents
complex strategies to newcomers without first ensuring they have the
emotional foundation to implement them successfully. It’s like teaching
advanced calculus to someone who hasn’t mastered basic arithmetic. The
knowledge might be valuable, but it’s premature. What matters most for new
investors isn’t finding the perfect fund; it’s finding the fund that helps
them become perfect investors. The perfect start, it turns out, is
perfectly imperfect.