When we talk about teachers, we remember those who have taught us valuable lessons at different stages of our lives. Most of us see faculty at educational institutions, mentors in professional life and role models as teachers.
Markets have always enlightened and guided investors in different ways. The market is the greatest & one of the best teachers in the world in the field of investing or trading. In trading, it is said the best book one can ever read is your trade log. The market is the greatest & one of the best teachers in the world in the field of investing or trading. In trading, it is said the best book one can ever read is your trade log. The market is a great teacher, provided one is attentive in the class. Most losing traders do not take notes in the form of a trader log to register what the market is trying to tell us.
Markets have always rewarded those who displayed discipline with their investments. It has penalised those who have been erratic and undisciplined in their approach. Stock markets are long-term bets and you will taste success if you follow a systematic approach.
Below are some investment lessons which every investor or traders has to learn from the markets:
Do full proof Homework: Equally important is to get your basics rights and ensure you fool proof your homework. Before investing in any stock, howsoever lucrative it may seem, dig deep into the company’s balance sheet, analyse its corporate governance model and look at key metrics such as P/E ratio, Beta, and so on before taking a call.
No Emotions have to be entertained: In stock market investments, emotions are a recipe for disaster. An emotionally-driven investment approach, more often than not, will cost profits made painstakingly over the years.
Don’t fear from short term Volatility: In stock market investments, emotions are a recipe for disaster. An emotionally-driven investment approach, more often than not, will cost profits made painstakingly over the years. When markets nosedived in March 2020, wiping out gains made painstakingly over the years, many investors went into a tizzy and exited their investments. In the process, they turned their notional losses into actual ones. However, those who remained committed, reaped gains when markets rebounded astoundingly well, taking everyone by surprise.
Adopt Long term approach: Stock market investments, particularly equities, are volatile in the short term. However, the quantum comes down to a great extent when you adopt a long-term approach. Markets move in cycles, and it generally takes around eight to 10 years for markets to complete one cycle.
At times, Mr. Market also gives you a long rope, especially during euphoric times, when you think creating wealth is all about getting the right tips without putting in any efforts. It’s only when he whacks you and those tomorrow’s “Blue-chips” bite the dust, you realise that wealth creation requires a lot of grind.
The idea is to select the correct investment avenues which accurately suit the targeted goals, expected returns, risk appetite and time period of holding. Proper formulation, execution and review of investment strategy are the three vital pillars of portfolio management. It is not a rocket science, there are certain rules which have to be followed in a disciplined way in a continuous manner.