Investors' Hangout: How to be a confident investor?

What, according to you, should an investor do? What are the basics that an investor must remember before they start investing or while investing?

Firstly, one should prepare themselves to be an investor. Many people engage in various activities and claim to be investors, but being an investor is like planting a tree. You must nurture it for the long-term. Just like planting a tree today and reaping its fruits later. The most important thing to become a confident investor is to understand that confidence comes from knowledge. Whether you're buying shares through a mutual fund or directly, it's essential to reduce risk because daily market fluctuations are unpredictable. It's nearly impossible to guess what happens on a day-to-day basis. Sometimes, people might get lucky, but it's often like tossing a coin. The real test of being a long-term investor comes when your capital faces a 30 per cent erosion. Investing is a thoughtful and deliberate postponement of consumption in the hope of building a larger capital for the future. Understanding these basics can help address many issues that investors face.

Another important aspect is to be cautious when someone presents an investment idea as a once-in-a-lifetime opportunity. If it sounds too good to be true, it probably isn't true. In good times, everyone feels like a genius, but it's during downturns that you discover if you're a true long-term investor. So, investing requires patience and understanding.

Remember, nobody cares about your money more than you do. People ask me how much to invest, but the answer depends on your earnings, context, spending, and what's left for investment. There's no one-size-fits-all solution. You must figure it out based on your unique situation.

Even after being mindful, there are many fraudulent schemes and scams prevalent today. How can one secure their investments effectively?

Securing your investments is crucial, and it starts with basic principles. Never share your OTP or password, as it's equivalent to signing a blank check. Sharing your OTP authorises someone to access your money. While convenience is essential, you must also be cautious about the new vulnerabilities it brings. To secure your investments, you need to understand the basics and not engage in activities you don't comprehend. Data security is becoming increasingly important, and we need to adapt to these challenges.

And today, it's not just about sharing your OTP; clicking on suspicious links can also lead to similar consequences.

It's equivalent to sharing sensitive information. Essentially, don't engage in activities you don't understand.

Could you provide some essential do's and don'ts to build a strong and secure investment portfolio?

Building a strong portfolio primarily depends on your behaviour. Most often, investors are their own worst enemies. They panic at the wrong times and make injurious decisions. So, here are five fundamental steps to follow throughout your investment journey:

• Prepare yourself for investing, save regularly, and ensure you have health insurance. Illness can derail your investment plan.
• If you have dependents, purchase term life insurance. This provides protection for your family in case something happens to you.
• Divide your savings, allocating funds you won't need for at least five to six years to equity. If you're a first-time investor, invest primarily in equity, but not exclusively. Equity is unpredictable in the short-run but rewarding in the long-term.
• Invest through mutual funds. This offers diversification and professional management.
• Invest regularly through SIPs, irrespective of market conditions. Don't overanalyse or overthink. It's about forming a consistent habit.

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This article was originally published on October 16, 2023.