There is no reason why anyone with a sensible head and a patient bent of mind cannot make a substantial amount of money in the financial markets, but there are many reasons why most people will not. Fear and Greed ,the two most omnipotent forces, have a unique way of playing with our minds and limiting our ability to achieve our financial potential. Admit it, not everyone of us is blessed with the same investing acumen, possessed by legends in the investment field like Warren Buffet, Benjamin Graham, Rakesh Jhunjhunwala and few others to count, however there are a few simple principles which if incorporated into our investing habits can help substantially improve our investment returns. Read on to know the top 5:
- Never invest when the markets are the flavour of the season :: How many times have you heard people say that stocks are a gamble and it is all manipulated. These are the people who generally enter at the very top of a bull run, and get wiped out when the market reverses. These set of people are generally drawn in by the circus surrounding a roaring bull market, the stories of all time high indices, the free tips and the promises of the imaginary millions. This is precisely the time to exercise caution and profit from folly rather than participate in it. So next time you get the itch to join the market circus, do desist.
- Buy when there is blood on the street :: The biggest wealth is created on the buy side when there is blood on the street and people are running helter-skelter. Over the years opportunities like the financial catastrophe “Demonetization”, “US Election” etc have provided unique opportunities which if capitalized on, have provided massively outsized returns in good stocks. So control the itch to be a perpetual buyer as this surely makes someone rich, but its your broker and not you. Strike only when the iron is hot.
- Don’t sweat the small stuff :: Every day you would hear about new risks for the markets, and scare stories about how there would be financial armageddon. Picture this, people sell off their portfolio of multibaggers due to a quarter of declining profits. The underlining companies and the businesses don’t vanish overnight because there was a down quarter. Instead use these opportunities to check whether the outlook changed for the business as a whole, and if not, use these opportunities to tank up on your favourite stocks.
- Don’t think of stocks as a Get Rich Quick Scheme :: Building Wealth in the markets takes time and patience. If you enter stocks thinking of doubling your money every year, you are better off investing the time and effort elsewhere. Investing in stocks is a game of patience and big wealth is created when you are able to identify a good company at good prices and hold it across ups and downs. Examples are companies like Infosys, ITC, Reliance, Eicher Motors etc. which have been 100 baggers many times over. So if you have honed in on a good company, let compounding be the tool to achieve your financial dreams.
- Ride the winners, and cut the losers :: As someone rightly said, big money is not made in the buying or selling but in the waiting. So let your profits run, but book your losses quickly. This way you may loose small sums when you are wrong, but will create substantial wealth when you are right. This over years of practice will sum up to a substantial fortune.
So friends these are some of the most important habits which if adopted in one’s investment plan, can help in creating a significant treasure trove. So Happy Investing and wish you a lot many multi baggers.
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