Successful investing requires patience, goal-focused strategies, learning from market volatility, and disciplined, consistent actions.
Investing is a process that begin when you start investing and ends when you achieve your varied investment goals. The level of success that you achieve at the end of your process would depend upon how you tackle various challenges that you may have to encounter from time to time. While you may not have control over certain events that could impact the markets and returns on your portfolio, there are certain aspects that can be controlled by knowing certain do’s and don’ts and following them in a disciplined manner. Here are some of the DO’s and how to follow them.
Be patient:
Equity investments require you to demonstrate patience and perseverance as markets tend to turn volatile from time to time. Therefore, how you react during such times will determine a steep fall like the one that we are witnessing now. No doubt, it can be challenging to remain calm when you experience increased volatility in the stock market. Therefore, the right way to avoid making ad-hoc decisions is to believe in your investment plan and the potential of the asset classes you are invested in.
Keep focus on your goals:
Following a goal-based investment process allows you to tackle the current scenario better than those who don’t have an investment plan in place. For example, you can handle the market volatility without panicking since you would be aware of how much time you have to recover the lost ground. For example, if you are investing to create a corpus for retirement that is 10-15 year away from now, you can wait out these turbulent times and benefit from the true potential of equity funds in your portfolio. Hence, you must try to align your investments to different goals and rebalance the portfolio, if need be.
Learn from the past:
Volatility is a natural phenomenon in the stock market. However, over the longer term, the market delivers higher returns that other asset classes. While historical returns can’t be taken as an indication of future returns, they do provide you a guidance in terms how the markets could react once the market gets back on track.
Continue your investment process un-interruptedly:
Systematic investing helps you in keeping emotions out of your investment process as well as allow you to benefit from “averaging”. While market volatility does impact your portfolio in short-term, the impact varies depending upon for how long the process has been continuing. Clearly, the longer you continue investing in a disciplined manner, the lesser is the impact of volatility. Therefore, continue your investment process irrespective of the market conditions.
There are some Don’t that are as important as DO’s.
Don’t look at your portfolio everyday:
While It is important to monitor the progress of your portfolio, looking at it on a daily basis begins to impact your psyche in different ways, depending upon the market conditions. When stock markets are doing well, you may get a strong urge to invest aggressively and that usually takes you beyond your risk- taking capacity. Similarly, in a falling market, it creates self-doubts in your mind and that may compel you to either exit from equities or stop making fresh investments. As is evident, looking at the portfolio frequently doesn’t help and hence must be avoided.
Don’t try to time the market:
A falling market also provides an opportunity to invest at lower levels. However, considering that it is hard to predict short-term movements of the market, making investments with a hope to make a quick buck can expose you to a high-risk situation. Of course, if you have an investible surplus that can be put aside for longer-term, it can be invested as a combination of lumpsum and systematic investing.
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