Exercise caution with "finfluencers"

Investing decisions cannot be taken lightly because they directly impact your hard-earned savings. Therefore, advising you to make investment decisions is a highly responsible job and requires a profound grasp of financial markets. However, there are many new-age financial influencers or 'finfluencers' who might oversimplify the complexities of equity investments and mislead you into believing that making money from equity markets is a cakewalk.

A recent crackdown by SEBI highlights the issue. Seven individuals were barred from the public markets for flouting advisory regulations. Using social media, they dispensed unlicensed investment advice, culminating in a hefty Rs 17.2 crore fine. This incident underscores SEBI's resolve to regulate unregistered advisors.

There have also been many cases in the past where the 'experts' charged money for their 'advice' on trading in the stock market while they made heavy losses on their personal investing decisions. So, how do you safeguard yourselves from such pitfalls?

Focus on the fundamentals

As an investor, you should always focus on a good business with solid fundamentals and competent management. Similarly, a thorough analysis of a company's performance is indispensable for understanding stock behaviour, which hinges on sustained earnings growth. The stock return of any company is highly dependent on its ability to consistently grow its earnings in the long run.

Be patient if you want to create wealth

While the idea of earning a massive amount of wealth in a short time is very alluring, it is not a realistic approach. Wealth accrues only over time, which is why the Stock market works only in the long term. Hence, we have repeatedly emphasised that time in the market is paramount.

Avoid the noise

The stock market is full of noise. The daily market fluctuations can create a lot of buzz, which may not necessarily be all beneficial. What's worse is that they distract you from your investment strategy. Instead, if you could disregard short-term volatility in favour of steady, your long-term investment strategies would often give you maximum benefit.

Learn proactively

Investing is a forward-looking activity which requires ongoing quality research into evolving business landscapes and potential investment opportunities. So, you should try to learn from the investment philosophies of legendary investors. Doing your due diligence and reading information from the company's management and trusted research papers should be your priority instead of following 'finfluencers'.

Also read: How to protect yourself from financial influencers

This article was originally published on November 03, 2023.