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“Investing is not a science but a craft and a craftsman needs tools”.

Thinking about being an investor makes me always worried about risks taking capacity. Is it easy to
invest your money when there is a chance to lose it? Is the road from being a non-investor to an
investor easy or it is full of worries? let us think about the journey. the way anyone transforms them
to being an investor.

Taking the leap: the road from being a non-investor to an investor

We will start our discussion with the point that what qualities we see in investors that make them
different from non-investors. or we can say what qualities we need to develop to be an investor.

We all want money, a lot of money, to enjoy our lives in a royal way, the way we are dreamt to live
for several years and years. The first thought to go with investing always comes with a desire to earn
more money. I think the most important thing other than the knowledge that an investor need is a
patience. patience when the result is going against you. don’t rush to sell when you are at loss. stay
calm and then think about it.

A lot of people get scared looking at the negative returns made by their investments and in fear of
further losing money, just book losses and redeem entire investments. Don’t do this! Stick to your
financial goal and the investment horizon that is necessary to achieve the goal. It is even more
crucial to stay invested during market swings as the market fluctuates heavily in the short term.
These swings get streamlined over the long run. Your investments could return at the expected rate
over the long term and help achieve your wealth creation goal.

A lot of people, fearing the market volatility, would stop their monthly SIP investments. This is a very
big mistake. SIPs help investors in multiple ways – Rupee cost averaging and discipline in investing.
In times of a slowdown, a SIP investment would give you more units for the same amount that you
plan to invest every month. By stopping or pausing your SIP you are missing out on accumulating
more units at a low cost. Also, your monthly investment discipline goes for a toss and you get off
track on your wealth creation journey. You may not be able to achieve your financial goals as you
earlier planned. So, continue your SIPs no matter how the market is behaving.

Equities as an asset class, although having a very high chance of giving superior returns, are more
volatile in nature when compared to fixed income investments like Bank FDs. These tend to give low
or negative returns in a short period of time. But over a period of long-term Equities generally
outperform other fixed income-oriented investments. But it is never advisable to put all your money
into equities only or one or very few stocks. Diversify your portfolio always. Understand your risk
profile and invest in diversified asset classes like stocks, debt instruments, gold/silver, and
international equities.

Although we’re discussing general investment concepts, the stock market needs a bit more attention
because of its seemingly abstract nature. No one gets confused as to what they’re buying when they
invest in a local dry cleaner. Most fixed-income instruments are priced in a fairly straightforward
manner. But when it comes to businesses traded on the public exchanges, which we call stocks, all
sorts of weird theories abound.

Stocks, for all of their labels and all of the strange fears and speculations around them, are no more
than a piece of an underlying business pie. When you buy stock in a business, you are buying the
right to the net cash flows that its assets produce. Stocks do not escape the orbit of financial gravity
no matter what the Fed is doing or what CNBC is saying. And buying into an index fund that owns
many stocks means that you’re now part-owner in all of the underlying businesses; your return
comes from the success of their business operations. If American business as a whole keeps on
trucking, the index fund will reflect their success, assuming you paid a rational price. That’s
why averaging into the indexes is such a common recommendation for non-professional investors.
Buying individual businesses in the form of stocks carries a heavier burden of proof and much more
specialized work.
One corollary to this idea is that stock prices tend to move around much more than intrinsic
business values. If you were to take the ten-year business record of any of a number of very stable
corporations and then guess their high and low stock prices in the same period, you would almost
certainly be surprised at the degree of variation.

You’ll often hear fables about how now is the time to invest because “The market has done really
well over the past few years” or because “My friend has made a lot of money on this stock, I think
it’s a good investment,” or some similar statement about other kinds of financial assets; real estate
properties, oil royalties, McDonald’s franchises, etc.

Conversely, one frequently hears things like “That stock’s gone way down recently, it seems pretty
risky” or “My friend bought a bunch of real estate that went way down, I think real estate is risky”
and other notions to that effect.

These thoughts are 180 degrees wrong because they fail to understand the point that low prices
create high future returns and that high prices create low future returns. (“High” and “low” being in
relation to underlying value.) If a stock trades at 50% of its recent high price, then you are buying the
same future cash flows for half the price. If a stock trades at 200% of a recent low price, then the
opposite is true; you’re getting exactly half the value you would have before.

You should seek to buy assets with future cash earnings you can (roughly) estimate at prices that
offer a fair return. The rest is almost always noise.

Investing does not have to be rocket science. Once you understand the central concepts and begin
learning to apply them, all it takes is discipline and intellectual honesty. Anyone can be a successful
investor, broadly defined, by sticking to their circle of competence and not straying outside of it, by
not speculating when they think they’re investing, and by always looking to pay a fair price in
relation to what they’re buying. These three central tenets, closely followed, can allow any
intelligent person to operate safely in the financial world.
So you need to stay calm during times like these. moderation is very important in situations like
these. Some people think that markets cannot go lower than the current level and adjust funds from
different sources to invest more and some others fear the downfall and redeem their investments.
Keep your fears or greed away from your financial goals. Both are not good for a portfolio and
financial goal. Try to limit checking your portfolio multiple times as it could give you unwanted ideas.
Always remember to link your investments and decisions to your financial goals and just stay
focused.
Being a good investor is all about education. There are so many facets to investing, that one person
or blog just doesn't have everything. In fact, you can spend years and years researching investing
topics, and there will still be things to learn or stones left to turn.