Psychology

Learn investing, don’t gamble

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Stock market investing is an art that has a steep learning curve. Most people enter the market to double / triple their money in quick time. That’s not investing, it’s gambling.

And since the stock market is not a place to gamble, it makes more sense to try your luck at a casino. You have better chances of doubling your money there. Trying to earn quick money from stocks will push you out of the market sooner than you think, even if your first few gambles make you some money.

The most important thing here is experience. There’s no substitute to time spent in the stock market. Sustained effort, learning everyday, discipline and controlling your fear and greed will make you a successful investor.

Most investors enter the market during the peak of the bull run. It’s a proven fact that participation from new investors is at its peak when the market also peaks.

So it goes without saying that in your first few years of investing, you’ll make mistakes and if the market conditions are favourable, you could make some money. But when the cycle turns and the bear market hits, even the most experienced of investors will realise that they’ve made several mistakes in the bull market.

New investors will be lucky to not get totally wiped out, because the peak of the bull run also means the fundamentally weak or fraud companies are rising the most. Inexperienced investors would be invested in faulty companies and when these start falling 20-30-40%, they simply wouldn’t know what to do. And before they even realise what has hit, many of these fraud companies would’ve fallen 60-70%.

But if you manage to survive this brutal phase, it’s in this bear market that most of the important investing lessons are learnt. Lessons that you’ll remember for the rest of your life. It’ll prove to be invaluable in the future.

Take this advice seriously: When you enter the market, start slow for the first 2-3 years. If the market is favourable, it’ll be tempting to put more money, but strictly invest only the money you can afford to lose completely. Most of your hard earned savings should go into equity mutual funds (managed by experienced people), debt funds and fixed deposits.

Spend time in the market, read news, read opinions, learn from your investment mistakes. Learn both technical as well as fundamental analysis. Experience one cycle of bull and bear market. It’ll teach you to love both the ups and downs.

If you are young, you have the advantage of time with you. Don’t be in a hurry to get rich. Invest in learning.

4-5 years into your investing journey, you’ll realise that earning good money from the market is not difficult if you know what you are doing. The trajectory of the Indian market is upwards and the country has potential for plenty of growth in the next 20-30 years.

Learn. Invest slowly. Be patient. When you get rich, you’ll know exactly what to do to stay rich and get richer!

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