You’re reading this probably because:
- You’re already an investor
- Or, you wish to invest in the stock market
In either case, congratulations, since you took the first step towards wealth creation. Being an equity investor, you are way ahead of other investors in India because you are doing what 98% of Indians don’t i.e. create a pipeline where money grows even while you’re asleep.
However, creating wealth through stock market investing is not a plain sailing task. It requires discipline, patience and perseverance.
Initially, when you get started, you’re swayed by the euphoria of making money in the stock market.
Everything looks glory and easy until the markets start moving downhill. And that is where majority of the investors give up or succumb to the twists and turns of the stock market.
All the money invested goes down the drain, and many investor take a vow of never entering the stock market again. Now if this scenario looks familiar to you, I’ve something for you.
I am asking you this question because the majority of investors don’t know this. They consider themselves as serious investors but often tend to do things which serious or successful investors avoid.
Here are 5 signs that shout out loud that you’re not yet ready to create wealth by investing for a long term.
Your investing decisions are ruled by your emotions
Stock market prices are driven by multiple factors. Emotions should definitely not be one of them. But unfortunately, most investors experience emotional biases and take decisions that prove detrimental to their portfolio.
When markets are in a correction mode, some investors lose their patience and sell their stocks for a loss. On the other hand, when markets are racing towards new highs, few investors make new investments hoping to cash in on the bull run without checking the fundamentals of a company.
"Be fearful when others are greedy. Be greedy when others are fearful." - Warren Buffet.
You are not ready to wait
If you are not willing to wait patiently and expect that you can make significant wealth from stock markets in a short period, you are not yet ready to become a long-term investor.
Wealth creation from equities is not an overnight process. It takes time. When you give time to your investments, you are essentially giving time to the company to grow.
"Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can't produce a baby in one month by getting nine women pregnant." - Warren Buffet.
You are doing what others are doing
Many investors invest on the basis of recommendations from their relatives, friends or colleagues who themselves depend on the advice of others. As most of these recommendations are irrational, they end up with heavy losses. Also, while following the investment advice of others, not many investors understand that the risk and goals of each investor are unique. If each investor has a unique risk appetite, financial goals and investment horizon, their equity portfolio should be designed keeping in mind their long-term objectives.
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.’’- Warren Buffett
You are ignoring the fundamentals
It is said that half knowledge is dangerous. Many investors tend to ignore the fundamentals and invest in stocks that are currently trending. When the market corrects, such stocks also take significant hits and sometimes never recover.
On the other hand, fundamentally sound companies can withstand market volatility over the long term. Fundamentally sound stocks are usually the first to recover after correction and outperform in the due course of time.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."- Warren Buffett
You are frequently churning your portfolio
Are you buying and selling equities regularly? Beware, this is definitely not something which serious investors do.
When you invest in the right opportunities, it is very important to stay away from the temptation of small profits and the fear of temporary losses. Rather, one should focus on the bigger picture.
Frequent buying and selling in your portfolio also mean higher costs in the form of brokerage and additional taxes.
"Doing nothing is often the right thing to do.’"- Warren Buffett
Now that you know the signs that shout out loud – DANGER, we truly hope you’re all set to enter the stock markets with a systematic approach.