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Summary
- An Investor should follow a disciplined approach for Investing.
- Start investing as early as possible and let your money work for you.
- Compounding helps in creating wealth; it is the return on your return.
Starting on the investment journey may seem scary initially, but people have made huge money by simply following some disciplined practices. Investing in equities requires a lot of patience as the markets are volatile. Not dealing with the markets in a disciplined manner will lead you to lose your hard-earned money. However, if you invest systematically, you may get outstanding returns. So here are some basic mantras you should keep in mind.
Know the Power of Compounding: Also, also known as the eighth wonder of the world if it’s about investment. Compounding helps in creating wealth; it is the return on your return. The basic principle is early you start, the more you get. To make the most of it, you need to stay invested for a longer period. This will help in grow your money exponentially.
Do Your Homework: Mostly, investors do not know what they are buying, thereby end up losing confidence in the bought stock soon. One should invest in business, not stock. You should go through the company financials to understand its current state and future projects. Try to understand the business and industry’s inside and outside only then go for investment.
Understand your Investment Goals and Risk appetite: before you start investing, identify what you expect from that investment and how much risk you are ready to take for the returns as the level of risk is different for a different instrument. Know your risk-taking capabilities and then invest. For Example, large-cap stocks are less volatile and generally suitable for risk-averse investors who cannot bear too many fluctuations with their portfolio.
Once you have invested in stocks, monitor them from time to time. If not daily, check your portfolio monthly whether it needs to be shuffled or working as per expectation.
Also Read: 5 Ways How Economy Impacts Stock Markets
Do not follow the Heard Mentally: It is the general behaviour of human to follow what others are doing, especially when you are new in the markets. Investors generally go by the name of the company or what their colleagues or relatives suggest to them to buy, which is not the right way of investing. To be successful, investor’s decision should not be influenced by the actions of your relatives or acquaintances. Following this mantra will help you in saving your hard-earned money.
Do not try to time the market: It is good to buy an undervalued stock, but every time, you cannot time the market. Most of the investors miss the opportunity to buy the stock just because they were waiting for the price to come down or the market to crash. One cannot predict the exact top and bottom. So, investors should buy when they felt confident about that stock at a fair price or even at a higher price if the stock has growth potential.
Apart from the above practices, one should diversify their portfolio and invest only with the available surplus funds. Do not let your emotions impact your financial decisions. Seek help from financial advisors who can help you in creating wealth.
