There are two types of complexities associated with investing in mutual funds. Borrowing from another field, I’ll name these ‘essential complexity’ and ‘incidental complexity’. Some of you will immediately recognise these terms and realise how they map to investing. However, the impact of the two types of complexities often gets mixed up and the solutions to ease one ends up worsening the other. It’s better that investors understand the difference and why they need to be kept separate in their thinking about investing.
