7 Ways the Stock Market Reflects Life
I’ve been dabbling in stocks for the past two years now, and, I must admit, it’s only the start of the journey, with so much more to be learned and earned.
What began as a casual interest during the lockdown in 2020, has now become a major interest area, where I read up many articles on a daily basis, and follow the ticker with quite some passion.
The journey from a writer to an investor has been an intriguing and educational one… Might I add, even a philosophical one!
When every stock market in the world is affected by external geopolitical events and fears of the pandemic rearing its ugly head again, the markets have been unsettling and disturbing for investors and traders alike.
The constantly changing reds and greens have made many a heart tick faster, or put a crease on several foreheads. But can one tide over the turbulence of the stock markets?
The philosopher in me says yes, and here’s why… Like all things human, the stock market too is a reflection of the mind, and, if you can control your mind, you can control your world… And, consequently, get better a handle on yourself when the stock markets are volatile.
So, here are some fundamental life lessons that also apply to the stock market:
1. What goes up, will come down
Sometimes, the prices of stocks get inflated due to news of some development in the company… Or, you notice that a recently launched IPO will suddenly shoot up multiple percent, wondering how on earth can you afford to buy the scrip at that rate.
Be patient — because, what goes up suddenly, will come down, and it will soon be at an affordable price that suits you.
Likewise what goes down, will also come up, if it’s a company with sound fundamentals… Again, simply be patient till you cover your costs, and then decide whether you want to get out of it, or stay put for a while.
2. The grass is always greener on the other side
Yes, whatever company stock you didn’t buy seems to be doing better than what you did buy. And, while you woefully look at the one that you missed out on, the one in your portfolio seems to have betrayed you, slipping into the red every now and then.
But, that’s exactly when you ask yourself the question “why”. When you understand why you did or did not buy that stock in the first place, is when you will let go of the feeling of FOMO (fear of missing out), and focus on what’s in your portfolio.
3. Track the news, but follow your gut
It’s easy to get carried away by one-off events that raise the price of a stock, but if you notice those prices will soon correct themselves. It’s also easy to get swayed by the hype behind many IPOS, and one gets tempted to ride the bandwagon.
But use your own intelligence and instinct before investing in companies who may market themselves well, but may actually not be performing that well. I did a lot of research on some IPOs, watched webinars on them, and finally took an independent call on whether I wanted to go ahead and invest or not.
4. Knowledge is your best weapon
Do enough research on the company you invest in…and then some more.
I personally track the stock price for at least a week before I decide to buy it. This helps me gauge how volatile or stable a stock is.
Of course, no amount of research will protect the markets from an external circumstance, like war, and its consequent effects, but companies built on sound fundamentals with consistent YoY growth, will still hold steady ground at such times.
5. To catch the rainbow, first experience the rain
Yes, your pot of gold awaits you, but not before some losses on the way. Like any trade or new learning, the share bazaar too is full of hits and misses. You will make money at times, but you will also have to book your losses at others… And, you will learn how to take all this in your stride.
As the rainbow only appears after the rain, likewise, you may experience some losses, before you see gain! You will be wrong many times, before you are right, and that’s fine… Because, in the long run, all your experiences will only make you a wiser, more prudent investor.
6. Make patience your master
Too tide over the highs and lows, the key trait needed is patience… A difficult trait to acquire if you’ve come to make a quick buck. But as they say — easy comes, easy goes… Or, slow and steady wins the race.
So, don’t be in a hurry to get in, and don’t be in a hurry to get out.
Take prompt decisions when you’re sure, but wait out the uncertainties… Because markets turn around, just like people and life. Change is the only constant here too, so don’t get disillusioned by any temporary fall or rise.
7. Start small, but think big
Investing in the markets is a viable income earning avenue, and it won’t hurt to try your hand at it in reasonable limits, if you are the risk-taking sort. But, even if you start with small amounts, ensure you dedicate some time in the day to tracking and growing your portfolio.
Also, no matter how small an investor you are, be brave enough to invest in the big companies, even if in small quantities. Quality overrides quantity, even in the stock market!
These were my few learnings as a novice investor, and I’m sure many of you who are already active and experienced would have your own lessons to share.
For those of who haven’t started yet, think hard before you do, because it’s a commitment of time and money… And, definitely don’t put your life’s savings into the markets.
Like everything else in life, test the waters, before you go any deeper.
Also, consult a financial advisor to understand how much of your wealth you can allocate toward the stock market at your age and with your current income levels.
At every step, be cautious and prudent, and avoid arrogance, fear, impulse and greed — four emotions, that when controlled, may not just save your investments, but every other aspect of your life!
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