It's still not late to consider the do’s that you may have missed out in your journey of financial freedom

Drive the investment car steady, follow the lane discipline, and decide your entry and exit points

By Mind Your Money/Dhaval Jasani

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Published: Sun 31 Dec 2023, 2:27 PM

Last updated: Sun 31 Dec 2023, 5:17 PM

Generally, Investing journey has a comma or a pause rather than a full stop. There is a vast difference between Investing and Trading. Financial markets tend to be volatile, and investors are supposed to embrace this volatility and factor in risks while investing. While pursuing this journey, here are some do’s that you may have missed to consider, and it may not be too late to consider some of these do’s while you pursue your investment journey:

The rule of 5

Follow the rule of 5, as in five fingers. Identify up to five asset classes for investment and four or five line items in each of these asset classes. If you are investing in equities, keep a track of sector(s) that you may be keen to look at, identify stocks within these sectors, peg price range and gradually invest in four to five stocks as a part of your portfolio rather than cluttering your portfolio with several stocks and you end up losing track of price movements.

Reduce the want(s) to allocate funds for future need

When was the last time you reviewed each line item of your bank statement or credit card statement. Try this out, highlight or underline expenses and outflows, that you may wish to curtail in the upcoming months and instead allocate a portion of these funds for investment or savings or instead, raise the contribution of Systematic Investment Plan (SIP), after having planned future cash flow requirements, that would allow you room to cater to any unplanned fund requirements. Try this for least 6 months and see the impact. Intention is to reduce want(s) and instead, raise savings.

Exit and no entry

Many a times, investors feel that they have missed out the rally in stock price movements, after having exited, and this Fear Of Missing Out (FOMO) tends to attract them to buy the same stock at a higher price, from where they exited. Most of the times, pricing tends to reverse and the investors end up holding these stocks for a longer time, waiting for their investment holding to turn green. Investors should strongly avoid this FOMO and avoid buying the same stock after exit. There are hundreds of stocks listed in financial markets globally and investors may choose to invest afresh, choosing to invest in stocks already added in watchlist earlier.

Do not change gears frequently or change lanes frequently

Borrowing a leaf from driving lessons, experienced drivers do not change gears frequently. Similarly, seasoned investors have learnt to ride the trend over a period of time rather than buying today and selling tomorrow or next week. This behaviour of changing gears frequently or changing lanes frequently, may eventually cost the investor their capital, as decisions taken in haste are often irrational. Pricing may not move in expected range with the blink of an eye. Movement in markets cannot be captured in haste. Investing in stocks today, selling these investments and reallocating funds in another asset class just based on price action of a particular day, will not benefit the investor. Drive the investment car steady, follow the lane discipline, and decide your entry and exit points. Have patience to hold on for the stocks / investment option to exit based on the price range foreseen. Ultimately, every entry should have a planned exit.

Give every dollar a job

Money generates money and this cycle continues. 'Learning and earning' never stops. Keeping funds idle in the bank account will not help the investor to generate any further additional income unless, these funds are deployed. Every dollar should have a job and this job can only be given by the Investor himself. List out preferred investment options in the order of priority, based on price action and gradually deploy these funds, without any rush.

Owning shares as if owning a business, know it inside out

Buy stocks in companies of repute, as if the investor is owning this business. Investors need to understand the business before investing and only invest after being convinced. Rational investors end up owning good quality business, after knowing the business inside out. Review investors pack released by companies, giving forecast to future revenues and trends. Ultimately, owning good business for a longer time rewards investors with decent returns. On the other hand, it may be risky for investors to own high risk business aiming to make a quick buck in a shorter time span, that may not turn out in their favour.

Dhaval Jasani is founder and CEO of ZTI Global
Dhaval Jasani is founder and CEO of ZTI Global

Rebalance portfolio after thorough review

Review your investment portfolio at periodic intervals. Rebalancing cannot be done 365 times or 12 times in a year. In fact, companies release quarterly results and revenue / business forecast at the end of every quarter, when they publish financial results for the quarter gone by. Investors need to review the investors pack released by companies, take cognizance of their future projection and prospects and then take a call, unless some event has triggered price action that may compel the investor to take a call based on price action in either direction, be it up or down. Such exceptional movements are news driven / action driven / event driven and exceptional, rather than frequent. Rebalance your portfolio twice or thrice in a year, if required.

Margin of safety

Out of curiosity, if investors are deploying funds in a particular stock, based on price action or market volatility, always leave a margin of safety, in case prices drop further down, from buy levels. Markets are extremely volatile and dynamic, with price action in either direction, up or down. Investors need to embrace this volatility, when dealing in financial markets. Margin of safety provides room to deal with such price swings in volatile markets. If investment is in good business and driven by companies of repute, volatility will eventually subside and prices will start to move forward. Patience is the key, and margin of safety will provide enough comfort to gain patience and face these price movements in a volatile market.

Be rational, not passionate

Remember, you are just an investor in a particular company, when buying shares. You are not a part of the management, to run the business. Investors should be rational, not passionate. World is not going to end and markets are not going to close. Do not rely on hope or change your thoughts based on the noise around. Go by the facts of the case and your understanding of these facts, ignoring the noise around. Ultimately, you will only realise profits or losses based on the shares held and the prevailing market price of these shares on the stock exchange for that day, not one penny more, not one penny less.

Wishing you the very best on this journey of growing wealth to attain financial freedom.

(Dhaval Jasani is CEO of ZTI Global)

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