Patience is a virtue that can be challenging for some investors to grasp. The tendency to be impatient increases when it comes to younger investors. Investors in the age bracket of 18 – 35 want a minimum of 10% return on investment but don’t wish to retain investments for more than a year. Also, they aren’t likely to hold on to an investment plan and switch between different mediums excessively.
Concentrating on short-term outcomes may deter the progress made towards long-term investment goals, which further limits the potential of a portfolio. If you wish to grow your money manifold, then you must invest it in a medium where your money potentially earns more profits – long-term investment (minimum two years).
A disciplined strategy can help investors earn more favourable profits over time while also minimising the losses. Let’s have a look at the top ways you can keep calm and get the best value out of your investment.
- Adapt To The Market Fluctuations
Investing in risky asset classes may be rewarding in the short term, but that’s not true for every investment. Understanding that the market fluctuates periodically would help reduce the stress built due to investment. For instance, if the stock market shifts toward a bear market (the time when the share prices fall), it is only due to a recession. It is a natural component of a business cycle, and as the economy strengthens, the market will shift toward a bull market (the time when the share prices rise). Investing is a path filled with ups and downs, and an investor shouldn’t sweat over each and every change that takes place.
Embracing the market swings will help alleviate anxiety and control your emotional decision-making power, thus make you patient enough to take the right decision. An investor should instead grab the opportunity and turn it into a profit by remaining calm and buying and selling assets when the time is right.
- Diversify Your Portfolio
An essential principle of investment is to make sure that you diversify your portfolio. Diversification means ensuring that you distribute your capital amongst various industries and investments so that you’re not dependent on just one investment for gaining profits. The main advantage of diversification is that it minimises the chance of capital loss in your portfolio. For instance, if one investment has a poor return on investment (ROI) over a specific time, other investments may produce a better ROI at the same given period. This essentially means that you’ve reduced the risk of possible losses on your investment portfolio by not concentrating all your money on just one type of investment.
Mutual funds and Index funds allow investors to analyse the market with low-risk options than stocks and bonds. These cost-efficient funds can be an economical approach to diversify over different asset classes. Additionally, investing a fixed sum of money systematically can reduce the average cost of the share and boost your potential for profits. This will help you escape emotionally driven errors of purchasing high and selling low.
- Identify Your Risk Tolerance
When it comes to investment, the higher the risk, the higher the returns. However, not every investor is capable enough to take risks with their hard-earned money and is patient enough to deal with the ups and downs of the market. For instance, if you are someone who can take risks and be fine if they lose money over the opportunity of gaining profit on your investment, go for aggressive investment mediums such as growth stocks. But, if you are a conservative investor, then select a relatively safer and long-term investment medium such as Mutual Funds SIP (Systematic Investment Plan), Bank Fixed Deposit (FD) or PPF (Public Provident Fund).
- Avoid Affective Forecasting
Affective forecasting means the habit of predicting the future. Doing so can impede with your decision-making ability and make you stressful. Anxiety and fear are often the main reasons why an investor showcases impatient behaviour. A well-grounded investor focuses on the present, while an anxious investor tries to predict the future. A prediction regarding what may or may not happen as compared to what is currently happening can intensify panic and trigger impatience. Thus, having a solid investment plan and avoiding affective forecasting can help increase patience and minimise troubled behaviour. Reevaluate your demat account to make sure your investments align with your future goals and prioritise them accordingly to help you balance your desire for short as well as long-term profits.
When it comes to investment, your primary goal should be to remain patient when you come across a risky market condition to avoid significant losses. You can seek the guidance of a qualified investment advisor to help you make the right decisions. It may not be a very exciting approach, but it’ll help everyone have a successful investing career.