PERSONALISED INVESTMENT MANAGERS
“The most important quality for an investor is temperament, not intellect. You need a temperament that neither derives great pleasure from being with the crowd or against the crowd.”
– WARREN BUFFET
Especially now, during a pandemic, it is almost a given that the market will correct again at some point in time. There are too many impacts on various businesses and changes in terms of people, policy and in general business-as-usual. At this time, it is necessary to be calm. Many companies are having to do a forced makeover in lines of business. Many businesses may go belly-up, & many new opportunities will open. There are enough examples of stocks zeroing down due to these factors. You must be sensitive to change and objective in your investments. But considering the number of people who have been subjected to a Work From Home policy, we have also seen an exponential rise in number of demat accounts being opened – a million a month! Read More.
It is obvious that many people are getting enamored by the all-time highs that the stock market is hitting consistently. New entrants are coming into the market basis an emotional high.
And being newbies, they will bear the brunt of a market crash if and when it happens. Assume, they would have invested anywhere between 5 to 10 lakhs in the market expecting huge returns in light of the sensex hitting an all time high again in Feb 2021. Emotional investing which may have worked in the past will not work in their best interests today. Imagine a scenario when the market crashes again by between 15% to 20% Know More.
Hard earned money would have gone into the market and depreciates overnight by between 15% to 20%. For someone at a 10 lakh investment, it means a drop to around 8 lakhs in his investment. That is humongous loss and pain for them. And it is more than likely that they will swear off the market as a gambling den.
They have not understood that there is a learning curve.
"When you learn to walk, you will fall, you will get hurt, you will practice, you will learn to balance, you will experience euphoria when you get it right the first time… all this is part and parcel of learning to work your investments as well. You need to spend the time to learn the market movement before it becomes intuitive. In between you will face losses, but look at them as your initial falls."
You will learn to have a financial plan, you will learn how the market works, maybe you will need a guide to help you navigate the first few years. Because you know that the market will grow. There are no two ways about that. Fear and Panic leads to selling of equities which have only received a temporary setback in terms of business lines. It is important that your financial consultant deciphers whether the macro conditions are conducive for wealth creation on that particular stock or is it time to exit. Conversely greed and excitement could also lead to excessive buying, a clear link to emotion while investing. Finally, it is about maintaining balance and controlling our emotions which leads to success in investing.
In the initial phase new investors need their investments to be managed by a financial planner who is able to read the movement of the industry to help people in their financial goal attainment and wealth creation. Think of these people like your family members who helped you learn to walk. They are in the best position to help you exit stocks or equity investments based on macro conditions or up stock as required in a downturn using reserve “cash” kept specifically for times like this in debt instruments which can be redeemed instantaneously.
To be truly successful, your financial planner should be able to calm you in turbulent times and reign you in during the euphoria. Don’t let your emotion get the better of you. Has there been a time when you either panicked or became greedy and bore the brunt of it in your investment? We would love to hear from you on how you reacted. Leave a comment below on your thoughts.