22-Jul-2022
2 mins read
The SIX Golden Rules of Investing
Managing a Portfolio doesn’t have to be complicated and it should not be exciting either. Making your capital work for you in the financial markets is the best method to earn a second income even when you are sleeping at night. It is not riding a roller coaster, it is climbing the ladder one step at a time.
Following are some golden rules of investing to be followed by every investor:
- The market is always supreme:
We should always have humble behavior towards the markets, and never try to supersede the markets in any situation. We have to change our stance as per the market situation and not be stubborn about it. If any market participant doesn’t change as per markets, he will spend the least amount of time in these volatile market conditions.
- Don’t try to ‘time’ the market, stick to your investment plan:
Many cautious investors, who play extremely safe, are tempted by better avenues like liquid funds, FDs, and fixed maturity plans as they want to avoid the volatility. Investors also alter their original plan according to the short-term news flows and developments in the broader markets and try to time the bottom and the tops. We should have the patience to go through the entire cycle to cash out when the market is volatile or moves in a tight range. The first thing is to sit down and fix goals and make an asset allocation plan.
- Don’t invest in what you don’t know:
You should always study the pros and cons of the asset before being fancy about it and investing with a blank rationale. Things like Bitcoins seem to be the most discussed new investment avenue but should not be the first choice for investment. People know every random feature of their Rs 8,000 cell phone, but will be clueless about their investments that are worth lakhs of rupees.
- Don’t love your investment; you don’t know when it will stop loving you:
In the field of investment, you should have a dynamic approach to all the investment options. The biggest obstacle to wealth creation is an inability to control one’s emotions and make logical decisions. When you buy something, you should have a good reason for doing so and an expectation of what the price will do if the reason is valid.
- Stay calm and think holistic:
Investing is a matter of thought for the long run and is not for a day or two. It is not easy to multiply wealth easily and needs a lot of effort and discipline. Whether you’re having a good day or a bad month, it’s important to stay level-headed. If you get fumble you’re likely to make mistakes and if you get too down on yourself you might start questioning yourself and your plan. It’s easy to let psychology take a hold of you, so remember what you’re doing and why you’re doing it.
- Be simple, don’t over-diversify:
There is an old saying in the street: It is not a stock market, but a market of stocks. You should adopt a slow and steady approach to the investment with simple logic which gives us clear entry and exit in the long run. Maintain a log of why the entry has been taken and where you want to exit it in the future for a particular investment.