3 Things to Keep in Mind When Learning How to Invest
Investing is the smartest decision you could make, right? Right. But let’s not forget that it’s scary too. While you’ll see so many people boasting about the amount of money they have made by investing in the stock market, there are many more who have lost all their wealth to it too. Well, if it seems daunting to you, let me break down a few fundamental rules of investing. And to give you a peek into how business moguls invest, here’s the top 3 things to keep in mind when you’re starting to invest.
1. Be ready to lose money
If you have heard the phrase that money doesn’t grow on trees, believe it. Biggest mistake people make is expecting to turn wealthy overnight. If you run a quick survey and ask around from investing veterans to newbies, everyone would give you the same advice- be ready to lose money. It’s almost a rule that initially you will lose up to 2 lakh rupees in investing. This is a step that unfortunately can’t be skipped. Many get demotivated and leave investing entirely after the initial losses. But keep reading, we discover why losing money can be the best thing for you to build good investment knowledge in the last point.
2. Understand the market
Another common mistake people make with investing is jumping into it too soon. Understand that any form of investing will be extremely risky if you are just shooting in the dark. For example, many Indians had invested hefty amounts in the last five years in the airline industry anticipating a rise in its stock markets. However, it crashed not soon after. The reason being its dependence on crude oil prices. If you are someone who has no idea how a particular industry works, don’t invest in it. And it’s not like you need to be an expert, but just research enough to feel confident about calling your shots.
3. Don’t follow the literature blindly
Books can only teach you that much. The real way to learn how to invest is by getting your hands dirty, by actually starting to invest. Let’s backtrack a little, this is what I nudged upon in the first point. All that the industry’s literature can teach you is the basics of the industry which will give you a path to follow. But more often than not, you will need to question these age-old methods and figure out what’s currently happening, and then map out the next step. Look around and ask what people with high returns are doing right.
I started investing as early as at 18 years of age. I have definitely failed a couple of times and then seen success. Do your share of due diligence. Delve deeper into understanding social currency, what companies everyone is talking about, which ones are people expecting to take a dip. These are great to kick start your investing adventure.
To get more insights, listen to the entire podcast with investing veteran Ajay Lakhotia here.
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