WANT TO BE A SUCCESSFUL INVESTOR?
Investing is a risk-versus-reward game. Where some have made millions, many more have lost. What are the characteristics that differentiate a successful investor? Successful and exceptional investors, such as Warren Buffet, Benjamin Graham, and Rakesh Jhunjhunwala, exhibit critical character traits that set them apart from the crowd. Have you ever thought about what all great and successful investors share in common? What distinguishing characteristics do these investors possess that you do not?
Successful investors aren't necessarily the brightest people on the planet. Being successful in your investments may have little to do with intellectual prowess and almost everything to with your investing mindset. Let's take a look at the key personality traits you'll need to be a successful investor.
1. Patience: An essential trait of successful investors. When they decide to invest, they do so by keeping the long-term picture in mind rather than making quick gains. Some of the investments may not perform at all for quite some time but if one is confident in the fundamentals, sooner or later, results will follow. In the long term, the prices will eventually follow and catch up with the profits. Even the corollary is true. We get tempted for a very high-performing stock where the fundamentals may not be that strong. There is a test here too. However, many of us fail the test of patience. All we need is some patience and the ability to remain calm in the face of turbulence.
2. Passion and Determination: The road to success in investments is paved and simple, yet difficult to follow. One of the key differentiating trait is consistency in what you are doing. All successful investors have their own science which they have practised over and over again and perfected over the years so that it now looks more like an art. One has to be committed and stay focused to practice your approach towards investments. Keep learning and improving your investment approach. If you are investing in say mutual funds, you may have saved a lot of time and effort in analysing stocks. However, still there is a need for you to be passionate about and focused on wealth creation and to follow your investment objectives /asset allocation regularly, with discipline.
3. Keep Emotions in Check: Sentiments are always present in the stock market. The stronger they are, the sharper is the market movement moves. Sentiments can cause a financial storm in the investment world. . That is why the risk of getting sucked into the market 'mood' is as dangerous as it is real. Beware of the two most powerful emotions in the market - Fear and Greed. Successful investors though can identify and differentiate the real from the hype and see beyond these emotions. They tend to get very active at such times since the market throws up many opportunities during this time and they act decisively during such irrational times and make the most of their investments. To be a successful investor, you must be emotionally neutral when it comes to winning and losing what. Winning and losing are just part of the game.
4. Understand and accept volatility: There are two way of dealing with volatility. One, the trader's mindset which drives people to react to the volatility. Second, is the investor's mindset where you avoid the volatility altogether. Many investors become concerned during volatile times and begin to question their long-term investment strategies. This is especially true for new investors. Experienced investors know that market volatility is unavoidable and designed to move up and down in the short term. More importantly, it is extremely difficult to time the market. Riding the volatility waves while staying afloat without getting wet is what would differentiate the successful investors from the novice ones.
5. Avoid Speculation: A speculation is a guess or a hope of something happening which is not well researched. Such speculations can be in form of tips from friends and from so called social media experts which we find floating around almost everyday. This should be taken with extra bit of caution as it can possibly be to lure unknowing investors. The opposite of speculation would be well-researched, future projections based on sound fundamentals and good assumptions. One can't really replace speculation with such a well-researched projections. Successful investors do not engage in speculation and see it more like a gamble with a known outcome with time. Some novice investors may get excitement and fun in speculating but, it is a sure way of losing both peace of mind and money.
6. Ask Questions: Good investors understand that it's better to ask a few additional questions than to regret or be locked into a bad investment. They are inquisitive and ensure that they understand all of the "fine print" of any investment product or asset. Any financial /investment product has its' own positive and negative factors. Should it meet your expectations, needs, risk appetite, liquidity needs and costs, is something you must question. Before making any decision, successful investors ask questions and consult with unbiased sources. To put it another way, they educate themselves and invest only in products which they are very familiar with.
7. Listen to what is important!: Update your knowledge on major economic, geopolitical undercurrents that may impact the markets on the long run. There is no need to track daily movements of markets and listen to every little noise happening on a daily basis in the market. With experience, successful investors learn to pick up only the meaning information and avoid the rest as just noise. With information so easily available and in such a huge quantum, this is an essential skill we should master.
Bottom Line: Becoming a successful investor takes time, patience, efforts and learning. There is no shortcut to success but knowing the mindset and the characteristics of successful investors can surely help us in our journey. Surely, even we can and be as successful as our investment gurus, at least by our own standards.
Develop the next gen by teaching growing children about money and finance
Are you the one who used to play with piggy banks, monopoly, stock exchange and other games in your childhood? Do you also remember getting happy at unexpected big amount of money you managed to save or having won at monopoly?
For most of us, the simple piggy bank was our first exposure to the concept of savings. Today, probably in the digital age, the piggy bank is seemingly lost somewhere. The world has changed and children today have much more exposure to finances and money. Teens today are one of the most sought after consumers for a large market, not just toys but things like clothes, entertainment, education, consumables, gadgets, games and so on. In such a world, our intent of exposing them to the basic personal finance principles and building good habits towards finance is a big challenge.
Its time for us too to upgrade our approach. During the adolescent and character building years of children, it becomes very important that we also build good money management habits and understanding amongst our children. The broad objectives for us as parents can be to:
- Give understanding on the importance of money
- Make them comfortable and confident in handling money
- Make them capable of managing money safely
- Make them financially responsible
- Develop enthusiasm for them to learn more and start saving for future
As parents who also happen to be investors, we surely can do a lot on this front with out children, especially when the usual academic education does no justice to this very critical aspect of life. Here are a few ideas on how we can pursue our objectives on money matters with our growing children…
Pocket money: In many ways, the pocket money to children is not different than the salary you earn. This simple understanding opens up to a lot of things which can be done with the pocket money. Pocket money is often the first taste of financial responsibility for many people. Giving your child a set amount of money on a regular basis, as well as the responsibility of paying for something they want, allows them to good money management habit. With pocket money, we can imbibe the principles of budgeting, savings, planning for big expenses, being disciplined & responsible, and so on. So the next time you think of giving pocket money, also think of so much more you can give along with just the money.
Budgets & Pocket money: Understanding the value of money is crucial during the growing years. With most parents affluent today, they tend to pamper their child and fulfil most of their demands. Doing so, the child may not value money and the effort you have done to earn the same. We can always seek participation of children while planning for household expenses /monthly budgets for the family. You can also encourage them to do some household activities or tasks to earn some extra money besides the pocket money. How about asking them to properly wash your car say once a week and show how much the regular car washer is earning? With digital skills, you can also reward them for completing courses or doing some digital activities on your behalf. Making them understand the value of money will surely impact a lot of other money related behaviour.
Spending Money: There is no limit to how much children can spend today. From entertainment to dining out, to travel, to electronics, and so on. Monitoring their spending and asking them to limit their expenditure to a set budget is crucial here. As parents, we should also learn to say 'No' to a lot of unreasonable demands which children place on us. We can also help our children to learn from our own habits and money behaviour while planning our own /household expenses. So the next time you decide to a buy an phone, why not just have a random talk with your child and ask for inputs? If we show discipline in spending ourselves, the children will surely learn a lot more than preaching them something.
Working with Money: Handling and dealing with money is another great skill to have. You can ask your children to go and open bank account for themselves. Transfer a bit of money to the bank account and let them manage /handle their money digitally. You may also give them pre-loaded money cards instead of hard cash. Ask them to track their expenses online with budget apps. Having a bank account and letting your children manage it on their own is a real time skill required to be learnt soon.
Investing Money: Seeing money grow gives a very different level of learning to children. Experience is the best teacher and we should expose our growing children to some real investment /wealth management experience. Share with them how and where you are investing and let them listen to your discussions with financial advisor /MF distributor. It would be the best if we can actually open an online mutual fund investment account for your children along with a bank account and ask them to invest regularly with SIPs. Let them make some saving and investment decisions themselves and let them learn. Ask them to present and discuss with you on their investment choices and performance from time to time. Real-time experience on savings can really make a huge difference to their attitude towards money.
Being careful about money: Last but not the least, with the benefits of digital world, there is a dark side where all types of online frauds and scams are prevalent. A lot of children get addicted to games and there have been cases of spending absurd amounts on such online games. Further, with constant online exposure, children also need to be learn on how to be safe online not just with money but also with privacy and a lot of other things which are very risky. Teach them of all different types and ways of fraud, cheating, scams happening online. Digital security is something that needs to be put on the top of your list as parents of growing children.
Conclusion: As parents, we wish the best for our children and wish them to build skills, knowledge and behaviour that are essential to be successful in life. We do not wish our children to be attracted to money or materialistic life but a the same time, we should teach them how to smartly use money as a limited resource so that it does not become a problem in life. Learning the virtues of contentment, happiness, sharing, caring, self-reliance, discipline and delayed gratification are the true lessons we should teach our children beyond just money management skills. We are sure, with little efforts and planning, your children will surely be thankful to you for life for what you teach them during these growing years.
Market Update:
While the Indian movie RRR made headlines with its popular song winning the Oscar, US Banks, SSS- Signature Bank, Silicon Valley Bank, Silvergate Bank made headlines for leading a global bank failure followed by Credit Suisse. The three banks were impacted by rising interest rates affecting repayment of loans by crypto companies, tech startups and other new age businesses.
This leads to one of the main questions, will this rising interest rate enviornment also cause trouble to Indian Banks? Though the big banks remained cushioned with apprantly strong balance sheets and good corporate governance where they ensure there is enough security to protect themselves from loan defaults, questions can be raised with regards NBFCs and new age lending platforms which provide unsecured loans at high interest rates to consumers, some of which are not compliant with RBI regulations.
On the flows front we are beginning to see consistent FII (Foriegn Institutional Investors) outflows starting 09th March 23 which are being balanced to a certain extent with DII (Domestic Institutional Investors) inflows, with the market correcting slightly to give a new buying opportunity. We expect the rest of the year to be volatile with US Federal reserve trying to reduce inflation amid a US banking crisis.
