YOUR TEMPERAMENT !!
Yes, when the market crashed it is YOU, who is responsible for any future losses and setback to your portfolio value. You may wonder why I am saying so..
Due to the Corona Virus concern, global equity markets are crashing continuously for a few days with a fear that it will impact the financial market in a big way. However, as an equity investor, what matters to us is a long term view than concentrating on such news based events (Up or Down).
The equity market is bound to have bull and bear rallies. In every 5 yrs average both bull and bear rallies come and go. But if we analyzed the historical data it is always a retail investor who never able to create wealth, rather he lost his hard-earned money and then blame EQUITY asset class for his losses.
It is very important to REMEMBER that Equity is only for achieving long term financial goals. The common investor should know that equity investment has the ability to make money only in the long run. If you have 7+ yrs life goals then only add equity in your portfolio. Never invest in any equity mutual fund just to see its last year performance. Mid and small-cap funds are good for 15+yrs life goals. For a shorter period stick to nifty funds, hybrid funds and large-caps.
If an investor knows that he is investing in the stock market through direct Equity or mutual fund route for long term goals he may not get affected by short term fluctuation in the market. The market works on sentiments. Sometimes the market reacts in anticipation of any event positively or negatively or it after the event happened. In both cases, no one can accurately predict how the market will perform, what could be the highs or bottoms. In both cases, your EMOTIONS plays a major role in deciding whether you create long term wealth or not.
Points to note down:
Wealth creation is a long term phenomenon. It can be achieved only when you keep on investing continuously and keep invested for long. Investor’s disciplined approach makes him invest regularly until his life goal is achieved. Don’t be disheartened with recent market downfall.
Your emotions can be one of the biggest destroying factors of your wealth. If we don’t control your emotions be it panic attack or over joyful feeling and take any decision under these emotions your wealth can be destroyed. So always have a steady and composed mind in handling your finances.
Focus on managing the downside risk of your investment rather than always trying to maximizing the returns from the investments. This attitude is very crucial to have sustainable wealth in the longer run.
In many financial decisions, identifying and evaluating market risk every time is difficult. Best way to consider risk is to gather information based on your experience and the experiences of others and to use financial planning information sources. Try to mitigate the risk in the best possible way with a well-informed decision.
Be disciplined in investing. Think of long term investments. Do not increase your heartbeats because of the short term fluctuations in the share market. Don’t take hasty decision based on these short term fluctuations otherwise, you will not be benefited by Compounding factor in the long run.
Never chase returns instead focus on the Corpus required to be accumulated: We panic when the market crashes because many of us always run after returns on the investments we make. So any reduction in portfolio value keeps our heartbeats and blood pressure varies. Remember returns are not in your hand. What is in your hand is saving more, spending cautiously, invest wisely and controlling your GREED and FEAR while investing. Focus on these things. focus on the corpus you want to accumulate and try harder to fund it seriously. Returns you earn on your investments should be considered extra. It is an ICING on the cake.
Everyone has own experiences in investing. It’s good to learn from other’s experiences. But self-learning through own mistakes, patience and fear will give the real learning. So keep learning and relearning through your own experiments in investing.
For equity investors what matters the most is controlling self behaviour and managing the market risk. Hence, always calm down in such market crash and never take any knee jerk reaction as this phase too pass. Have a steady mind in ups and downs of the market, global economic conditions and personal life too.
At the end, I will say that
Investing in hundred stocks is not a miracle. The miracle is to find a single such stock which will stand by your side even when hundreds are pulling down your portfolio.
There is no definition of a Good investment or Bad investment. It all depends on You And your selection of products, that
Either You rule the Investment Or Investment ruins you!!