Investing Lessons for New Investors

Do you remember riding a bicycle for the first time? The moment we start off, we feel wobbly, unsure of what we’re doing. Whenever a bump comes in, we feel like it’s going to throw me off. We hold our grip on the handle too tightly and overreact to every movement, and yes fall a few times (nobody learned to bicycle without falling 😊). But if we stick with it, finally we slowly find our balance. Slowly we also realise that it’s not about avoiding every bump but learning how to ride through them without falling/crashing.

The investing world has some similarities with bicycle riding. Here also some time we fall, we crash, but if we stick with it…finally get the balance in it and start enjoying.

 

In this context let’s learn a few basic lessons for investing:

 

1. We do not need a high financial market knowledge to do well as an investor. In fact, the biggest financial crises have been caused by those highly qualified market experts.

What we actually need is good EQ (behavioural maturity/control) to minimise the mistakes of wrong behaviour that causes investors to make big mistakes.

 

2. We don’t need to spend 5-6 or more hours per week worrying about stocks, markets, the economy or other investments. There are better things to do in life.

We need to plan our investments, do proper asset allocation, select the right products execute it properly and then let the wheel roll.

 

3. Investing is not risky because the market is volatile, as we feel and are scared by the Business News Papers/ Channels, TV Anchors,  jargon-filled analysts, fund managers, and other fin-fluencers.

Investing is risky when we don’t understand what we are getting into and why. Not investing is more dangerous than investing (remember the future value of money and inflation).

 

4. Every person is unique, so as his/her needs, our main task as an investor should be protecting capital and beating ‘inflation’ over the long term So that we can maintain or grow our purchasing power and meet our financial goals.

Remember: Investing is NOT about beating the market or our friends, colleagues or neighbours but about achieving our goals.

 

5. High risk does not always have equal high return.

The stock market does not work in a simple principle of high risk and high returns. We should buy good investments at reasonable prices—by keeping a margin of safety—we are taking low risks which can give reasonably high returns.

 

6.  Few experts advise ‘Diversification is for losers, you must concentrate,’

For new Investors, it’s not a very good idea, Concentrated Portfolio can make you big money but has huge risks that could be disastrous at times.

The prudent thing would be to Diversify enough but Not too much. Mutual Funds are a good vehicle for Diversification.

 

And Finally:

Investing is a Marathon, not a 100-meter sprint, Set your goals, educate yourself, have patience and take proper guidance from an expert to do better.