Why is it that success seems to come so easily on some people but continues to elude most? It cannot be attributed to sheer luck alone. As the adage goes, “It’s all in the mind.” This statement cannot be any truer than in the world of investing. Developing the right frame of mind is critical to achieving your financial goals.
Here are five awesome ways which help you big time, if you want to develop your mindset for smarter investing!
1. Don’t try to time the market
One thing that even Warren Buffett doesn’t do is to try to time the stock market, although he does have a very strong view on the valuation appropriate to individual shares.
A majority of investors, however, do just the opposite, something that financial planners have always been warning them to avoid, and thus lose their hard-earned money in the process.
So, you should never try to time the market. In fact, nobody has ever done this successfully and consistently over multiple business or stock market cycles. Catching the tops and bottoms is a myth. It is so till today and will remain so in the future!
WHAT EXACTLY IS TIMING THE MARKET?
Let’s assume you have INR 1,00,000 to invest. Based on your goals and priorities, you put INR 50,000 of the money in stocks, INR 30,000 in bonds, INR 10,000 in real estate, and INR 10,000 in cash.
A typical market timer seeks to sell at the “Top” and buy at the “Bottom.” Thus, if interest rates increase, the market timer may sell some or all of his stocks and purchase more bonds to take advantage of what may be a “Peaked” market for stocks and the beginning of a boom for bonds
2. Take Action
Procrastination can very well be the single thing that prevents you from starting your investment career. Nothing will ever happen if you keep making excuses.
If you’ve told yourself countless times that “interest rates keep going up”, “I lack the time to learn about financial markets”, or “I should have bought this stock five years ago”, then you better start blaming yourself instead of pointing fingers.
Start treating your investments as a business instead of a spare time hobby. You can read all the tips and tricks from successful investors but nothing is going to change unless you do these things yourself.
3. Do not let emotions cloud your judgement
Many investors have been losing money in stock markets due to their inability to control emotions, particularly fear and greed. In a bull market, the lure of quick wealth is difficult to resist.
Greed augments when investors hear stories of fabulous returns being made in the stock market in a short period of time.
Instead of creating wealth, these investors thus burn their fingers very badly the moment the sentiment in the market reverses.
In a bear market, on the other hand, investors panic and sell their shares at rock-bottom prices. Thus, fear and greed are the worst emotions to feel when investing, and it is better not to be guided by them.
4. Accept losses
Even the most successful investors have had huge losses in their careers. What sets them apart, however, is the understanding that losses are a part of the investment game.
You simply cannot win 100 percent of the time. But if you take the time to do your research, you have a better shot at making informed decisions which boost your chances of growing your money.
Consider your losses as an investment in your future success, ensuring that the mistakes you have made will be more than made up by your future decisions.
5. Always Invest in Businesses You Understand
Last but one of the more important point, never invest in a stock. Invest in a business instead. And invest in a business you understand. In other words, before investing in a company, you should know what business the company is in.
There are always other ways to develop a smart investor mindset since it is quite subjective and works differently from person to person. But these are the five you should always have in mind, among the others that you think work for you!
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