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What should be the right mindset before starting to invest?


The right mindset for investing.

Investing is not the right activity to have a “Heads I win, tails you lose” mindset. Unfortunately, that’s the attitude of many amateur investors.

Think about it – Is it possible to be on the winning side every time? In that case, who will lose? Hence, expecting to win all the time is an illogical thought. There are risks involved when attempting to make high returns.

Every time you invest, you will be investing in a group of assets. You’ll have money invested in a portfolio of assets. For eg- stocks and gold.  Among stocks you’d again diversify your money between different companies. Some may prove to be good picks whereas some others may not perform at all.  The overall result would be that you’ll have a mix of excellent and poor investments in your kitty and hence, all probability, you’ll have a portfolio that may perform somewhere between the best and the worst. You cannot do anything about it. That’s the way investing is done.

The second point here is that, it’s important to have a positive outlook. It’s natural for investors to look back and see missed opportunities that were knocking at them. Had they acted at the right time, their life would have been different. That’s how every investor’s life is – it’s always understood backwards. However, it’s important not to think negatively about those golden misses. Such missed chances are part of every investor’s life. It has nothing to do with your stars or bad luck. We’ve witnessed many investors blaming their starts or bad luck or whatever because they didn’t spot a golden opportunity. The worst enemy of an investor is self-inflicted psychological damage. It is very difficult to overcome.

We suggest you keep these simple thoughts in mind while you invest –

  1. Do your homework well. When you invest your money, you should be clear about the objective- how much profit do you expect? How much time will you hold on to it? Why are you buying it –do you have enough reasons to justify your actions? Most importantly, how much loss are you willing to tolerate?
  2. Try to avoid pointless conversations about what could have been done. Don’t look at the past and count the profits you lost because of a wrong decision you made.
  3. Instead of analyzing individual investments, evaluate your entire portfolio. You might have lost in one, but won the other. What matters is the overall rate of return.
  4. If you are invested for the long term there is no point in getting worried about the current value of your investments. Current value may be down due to various reasons.
  5. If you have been experiencing a streak of good luck, it’s better to slow down. Do not rely on your instincts or gut feeling or lucky star every time. Investing, especially stock investing is not the right place to try your luck.
  6. Cook your own recipe for achievement. Sure, a sound knowledge in every aspect of investing is required to produce a good result. You have to learn from others, use books and web-based material a lot. But, make sure you are using the right resources. There are hundreds of books that give out wrong or incomplete pieces of information. For example, recently we came across a book that guarantees 100 % profits from the stocks. Such books are not published with the good intents.
  7. Investing is a tough and serious business. On the contrary, never be too hard on yourself. Relax. Have fun.   Keep your mind clear and concentrated. Having a positive mindset can give you immense results and at the same time, have fun while you earn your bucks.
  8. Always focus on the positive aspects of what you have done.  Take investing like a sport where you win some games and you lose in some other.
  9. Each investing episode in your life will have a lesson to teach. Note it down, and never forget what you’ve learned! That’s the way to becoming a smart investor.

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