WHY NOT TO INVEST IN A HURRY AND REPENT AT LEISURE BUT PLAN, PREPARE AND THEN INVEST TO BE HAPPY AS WELL AS WEALTHY IN LIFE !!!

I was frantically asked by some near and dear ones after the recent ongoing correction in the equity markets if they could buy and invest now. There can be no one word or general answer of yes or no , hence this blog to explain in some details.

Every individual has his own unique life position and financial situation which will govern if its right to make any investments in equity when opportunities like this present. There are other issues like are you ready to make use of such opportunities??

I recommend making and learning equity investments only directly and not through the mutual funds route only when you are ready for it. If process is right and you are ready to make investments then timing the markets or waiting for such corrections may not be required as it becomes not so relevant for you. What is more important is you remain happy and also become wealthy in life. Adherence to a process and following it thus becomes the key.

“ Happiness is nothing but a state of mind that we create by the way that we process and interpret the events in our life…”

What preparations are required before one starts to learn and practice making equity investments ? I have discussed some of the issues in my previous blogs already but here is a check list of sorts

1. Term insurance adequate to cover financial risk to the family for all earning family members

2. Health insurance

3. PPF accounts if resident Indians for all family members

4. One owned house to stay in or rent and rent one at a different place.

5. Habit of making a monthly budget , noting down expenses and reviewing the budget with the actual at the end of the month.

6. Focus on regular savings

7. Making a list of your assets and liabilities and reviewing it every quarter

8. Having an emergency funds for six months of family expenses.

9. Your monthly budget must be known to all family members except children below ten and prepared jointly.

10. Believe that giving some small part of your income to any needy person without expecting any return or benefits only helps in growing your wealth. ( Don’t know how but it works that way)

What else you need to be prepared for learning making equity investments :

1. Basic knowledge of finance and equity markets

2. Developing right attitude towards money

3. Discipline and patience required to grow your investments

4. Ability to ignore the market media hype and keeping away from vested interest advisers like banks, insurance agents, share brokers and even a few friends giving free information

5. Complete faith and trust in the process to achieve your Financial Freedom.

6. Some savings to begin investments and regular savings every month to follow up and invest as a SIP.

7. Selected list of companies in which you want to invest over long term

8. Some basic skills and techniques to manage risk inherent in equity markets like stop loss or when and how to buy and sell.

9. Believe that money is only a means which can lead you to happiness in life and hence essential to have just enough of it to achieve Financial Freedom and not an end by itself.

10. Deciding if you need a truly independent teacher to help you or you can manage it your self.

SHARP CORRECTIONS OPPORTUNITY ONLY FOR THOSE WHO HAVE THEIR STRATEGY AND PROCESS IN PLACE !!

Te answer can be yes only to those who have the strategy and process in place and are regularly investing in selected equity of companies systematically.

Such investors can invest a little more than normal and make use of such opportunities without being greedy and taking any undue risks or trading even in their own selected companies.

WHY NOT AN OPPORTUNITY IF NOT READY AS DISCUSSED ABOVE !!

There are a very large number of companies listed on the exchanges and fall in their prices at such corrections is not even and can be very risky as so will be the rise when the prices recover from the correction. Many may not recover but fall further so its not worth taking such risk which is akin to gambling.

As an example please see the fall in prices of some of the companies many of which were being recommended by vested interests and media manipulators and resulted in losses for the investors.

Probability of your buying equity at such times which will grow your savings is very less if you are not prepared and ready to make use of such opportunities as discussed above. Its only to explain and not scare you. Similar but much shorter will be the list of companies which have not fallen or have risen despite the trend. But your ability to correctly identify the winners and keep risk within control will be the same even if you were to buy from such list.

Similar is a longer list of mutual funds who have lost value but the difference is the fund houses and managers have no risk and all risk is taken by the investors who pay them too fees.