The New Age Investment Approach – ‘In Control’ Investing
The market is down with a 14% correction at the Nifty level, individual stocks have gone down by 50%+ and there has been a carnage. Are you losing sleep?
Just breathe, imagine and accept – it’s your investment style and approach that’s responsible for it. The market isn’t your friend, so you cannot expect it to be generous to your investments. Isn’t that wishful thinking?
Discover how to manage your investments so that you can be in control and not the market! You don’t invest to lose sleep and stress out about risking your hard-earned money. Spend a few minutes to get a different perspective on investing. Take charge instead of being controlled by the market moods.
Here are 5 common myths that could cause more harm when followed –
1. Generic Investment Philosophy - You will hear a lot of stories on buying low and selling at the top.
However, no one will be able to tell you what the low is nor the top. So when do you buy and when do you sell?
2. Undefined Timeframe – ‘Buy for the long term’.
This is a very generic statement. Even in the long-term, you might have bear phases in the preceding timeframe before you want to exit. You can’t always extend the time horizon.
3. In-depth investing skills – ‘Buy quality assets.’
How do you know what quality looks like? It needs a lot of diligence and homework; do you possess the skills to identify quality?
4. Uncertainty - Don’t panic and sell in corrections, stay firm and hold your investments.
Then again, you don’t know where it will stop, whether what you have invested is going to bounce back post correction and exactly when. It can also go sideways for a longer than expected duration.
5. No Credible Source - Don’t react to rumors. At times, they are rumours and baseless.
Sometimes, they can be real and it is prudent to act on them quickly. How do you know which one to believe and which not to?
There are a lot of other myths too. However, these are the high-impact ones. Collectively, they can lead to a lot of instability in your investment strategy.
To simplify the approach, here are 5 investment mantras from 5nance. Take charge, gain control and make the market work for you:
- Low/No Dependence - Don’t give too much importance to the market. It is a fact that it will never go to zero. However, fundamentally the definition of a marketplace means it is supposed to be volatile. Hence, never make it your primary source/focus for your earnings. Earnings from the market should be your second salary/income and not the first.
- Disciplined Investment Corpus - Never invest all of your savings into the market, under any circumstances. Basis your risk profile and future needs, decide a fixed % and expose only that part into the market. Never exceed.
- Risk Management - Under no circumstances, expose yourself to more than 10% of your portfolio to any single stock/group.
- Return Expectations - Never feel excited over stories of abnormal returns and get carried away. Like abnormal returns, abnormal losses are also as real. However, those stories aren’t commonly shared. Stay real and look for normal and at times above-normal returns, not excess returns.
- CAGR Approach - Have patience, you are investing in businesses, and their growth. The growth needs adequate time to reflect into the stock price. Do not look for quick and easy returns. It’s not sustainable. Look for continual sustainable returns in the form of CAGR returns and not quick absolute high returns. This will help create wealth that is real, truly deserving and yours. This will also help define your investing timeframe.
Don’t treat the market like a Casino. Look for consistent, continual and above-normal returns. This will deliver and help you prosper. Make the market work for you with a disciplined and controlled approach!
One must not get carried away. The market’s job is to take money away from you. In a marketplace, one is selling and one is buying. Hence, one can only make money when someone else is losing. Why can’t it be you who is the losing one? There are many intelligent investors waiting to take money from you. Hence, a disciplined approach is the only one that will help you stay ahead. Every time, focus on earning on a CAGR basis rather than wanting to hit a jackpot stock.
The market is going to be there always. Every year, look to earn reasonable, above-normal returns rather than inconsistent one-time lotteries. Treat the market as another source of income. Make the market work for you and not your money to work for the market!
Want to know more on ‘In control Investing’? You could write to me on dinesh@5nance.com
