Financial Cocktail Samosas: Bitesized Money Morsels For You, 22/02/2023

Universal Dilemma: Is it the right time to invest?

Mango is the undisputed king of fruits but if you try to buy mango in the winter season, you won’t be able to get natural/tasty mangoes even after spending a huge amount for them.

Does it mean that your fruit basket should remain empty or you stop eating fruits till the time mangoes are readily available in the market? Simply No!!

Fruits are essential components of a balanced diet and you can’t keep your fruit basket empty. You may enjoy other seasonal fruits like grapes and oranges, there are fruits which are available throughout the year.

Similarly, you shouldn’t postpone your investments just because a particular category does not seem to be lucrative. Or because you are likely to get a lot of money later, say on retirement or the sale of a property, and then you will invest. It will impact the health status of your goals – start today. As they say, “the best time to plant a tree was 20 years back and the next best is now!”.  Investment basket also has a lot of variety. It is just the lack of knowledge/awareness about different categories that keeps us confused.

For instance, the series of rate hikes by RBI will be coming to halt shortly. This has presented unique opportunities for investment in safe debt mutual funds, which offer better tax-efficient returns compared to FDs. While some mutual fund categories may have underperformed in the past, that doesn’t mean they won’t present opportunities for growth in the current market.

So, don’t let a lack of awareness keep you away from exploring the many investment avenues available to you. Seek out the guidance of a professional financial planner who can help you navigate the various options and make informed investment decisions.

Just like with fruits, there’s a whole world of investment possibilities waiting to be discovered – all you have to do is take a bite from the fruit in demand!!

(Contributed by Jatin Uppal, Deputy Manager, Hum Fauji Initiatives)

Time and Patience – Two Key Virtues to Become Successful in Investing

Consider the story of Warren Buffett, one of the most successful investors of all time. Buffett is known for his long-term investment philosophy and his unwavering patience in the face of market volatility. These two key virtues – time and patience – have been crucial to his success and serve as a valuable lesson for investors of all levels.

Buffett believes in holding onto investments for the long term, with his famous quote stating, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” By embracing this long-term mindset, Buffett has been able to reap the benefits of compounding and build a substantial portfolio. His investment in Coca-Cola, made in 1988, has grown by over 1,000% since then, thanks in large part to the power of compounding.

In addition to time, Buffett’s patience has played a critical role in his success. He remains unshakeable in the face of market volatility and avoids impulsive decisions. During the financial crisis of 2008, while many investors were selling their stocks, Buffett was buying undervalued stocks, believing that they would eventually recover.

Investors at any level can learn from and replicate Buffett’s story. By avoiding impulsive decisions, taking advantage of the power of compounding, and having the right category of investments, investors can achieve their long-term financial goals. Patience and a long-term approach to investing are key to success.

In conclusion, time and patience are two key virtues that are essential to becoming a successful investor. By embracing these virtues, investors can avoid impulsive decisions, reap the benefits of compounding, and achieve long-term success in their investments.
Buffett’s story serves as a valuable lesson for investors at any level, reminding them that investing is a marathon, not a sprint.

(Contributed by Manish Kumar, Relationship Manager, Team Vikrant, Hum Fauji Initiatives)

Ride The Wave 

When life is good, we feel unstoppable. But when things take a turn for the worse, we often panic and make impulsive decisions. This is particularly risky when it comes to investing, as emotions can seriously harm our financial health. That’s why it’s crucial to learn how to keep a level head.

According to the traditional investing model, investors should always act rationally and make investments to generate the highest long-term returns after adjusting for risk. However, studies have shown that most investors are more interested in quick profits, which can lead to bad choices and a failure to accumulate lasting wealth.

To succeed in investing, we must learn to control our emotions and think logically during the most challenging stages of the investor cycle. These stages are:

  • Euphoria – Investors may feel euphoric as markets reach the peak of a cycle. We begin to believe that investing at that time was a wise decision and that the good times will last indefinitely. We might even deceive ourselves into thinking we can handle more risk, leading us to start trading more frequently or investing in riskier asset classes.
  • Despondency – When markets take a downturn, those who remain invested may become discouraged and wonder whether they should ever have invested their hard-earned money in that avenue. But savvy investors and financial advisors say this is the point of maximum financial opportunity.

The key to overcoming influence of emotions on our investments is to recognize that they often guide us in the wrong direction. Instead, we should focus on making calculated decisions based on solid data, not our feelings. By doing so, we can make the most of our investments and secure our financial future.

We can’t stop the wave but we can learn to surf!!

(Contributed by Aman Goyal, Associate Financial Planner, Team Prithvi, Hum Fauji Initiatives)

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