How much do we love listening to this Kishore Kumar classic…,’Zindagi ka Safar hai ye kaisa safar, koi samjha nahin, koi jaana nahi’…. A song that always intrigues us about life and its nuances. Now, let’s simply replace the word ‘Zindagi’ with ‘Equity Markets’ and you will realise that the level of intrigue is the same when we think of Equity Markets as well.
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Greed and Fear
This intrigue mainly stems from the uncertainty associated with the markets. This uncertainty or volatility if you may call it makes the investors emotional about their decisions to invest and in a broader sense about the overall market itself. Expectations of higher returns in a short time, the euphoria of an investment decision going right, and the thrill of sharing your equity success stories with your family and friends are some of the positive emotions which are deeply entrenched in every investor’s mind. Alongside are also the lurking fears of all the above emotions turning negative. Your short-term speculative decisions going wrong, your failure to beat the benchmarks or the fear of being unanswerable to yourself and your family after perennially losing your invested capital. All these financial emotions are mainly centred around greed and fear. The greed to get sky high returns in bull markets (and in fact, at all times !) and the fear of losing money in bear markets.
Equity, the beast
It is now well understood that be it a ‘bull or bear’, the only ‘beast’ that helps you beat inflation is Equity. It creates wealth for the patient investor in a gradual disciplined manner and achieves their long term financial goals as well. However, the main problem is that too many external factors control the behaviour and performance of this ‘beast’. Company earnings. economic conditions, geo political events and the daily market euphoria being the major factors on which you have personally no control, but surely what you can control are your own emotions. I am not suggesting here to get into some sort of meditative techniques or change in lifestyle to manage your emotions. Though it is easier said than done, I probably would like to highlight certain perspectives which are certainly in your control and can help you channelizing your financial emotions in a far more efficient manner.
Allocate your investments according to your financial goals with a definite time frame
This would help you sleep well, be it bull markets or bear markets as the right investment products are pre-allocated in line with your financial goals with a definite time frame. All your long term goals ( i.e 5 years and above ) have equity products like equity based mutual funds / direct stocks tagged to them to ride out the volatility and all your short term goals ( i.e from now to 3 years to 5 years ) have a chunk of fixed income products and a bit of hybrid funds taking care of it.
Do not listen to fin’mis’ fluencers on social media promising dreamy returns in ‘Hera Pheri’ style
There is no way you can continuously keep making quick money. They are not regulated and hold no responsibility for their advice. Genuinely if they knew the right ‘mantra’ for hitting the ‘jackpot’ perennially, why would they be sharing it with everyone time and again and simply not benefit themselves from it ?
Understand the Basic Rule of Investing in Equities
When you invest in stocks or Equity based mutual funds, you are directly or indirectly buying a share in a business for the long-termlong term gains to create wealth and not speculating in it for the short term.to make money.
Businesses and Economies
Business and economies move in cycles due to various factors and so will the equity markets that invest in them.
These cycles go up and down. At times it may take a long time to revive after a fall and hence it becomes imperative for us to be patient with our investments. Good businesses and economies revive faster than the not-so-good not so good ones. Being impatient or hasty is often the differentiating factor between an investor simply making money or creating large wealth through equity investments.
Keep Your Primary Income Source Secure and Running
Keep your own profession, job or business which is your primary source of income intact, secure and running all the time.The surplus amount which you save and decide to invest judiciously preferably on the advice of a proper ethical financial advisor for the long term should be invested regularly in the equity markets.
And finally, Keep your EGO away…
If you have sufficient time, energy, resources and knowledge on various factors regarding equity markets, companies, and economic conditions, can understand balance sheets, accounting and financial ratios perfectly well then only should you think of buying stocks and shares directly. If not, be honest to yourself and simply get professional help from a proper financial advisor to get your Investment journey started through Equity based Mutual Funds.
You may then probably realise that ‘Zindagi’ and ‘Equity markets’ are not that intriguing and one can sail through them quite smoothly.
