Tips To Become A Successful Equity Investor

The first thing that an investor must do, and keep doing on a regular basis, is to ‘know thyself’. 

The reason for this is that there is no investment that can be judged as the right one without knowing who it is for and the purpose for which it is done. There are great mutual funds and stocks that could be completely unsuitable for certain types of investors and for meeting certain types of financial goals. 

Note that an investment can’t be judged to be the right one without knowing more about the saver’s life. However, it can certainly be judged to be the wrong one. There are lots of investments that are always unsuitable for everyone, but we will talk about these later. 

Conventionally, the first step to know yourself from a saving point of view is to decide your financial goals, fix the time frame in which these goals have to be met, determine the flexibility of those time frames, if any, and include a certain amount of tax awareness with regard to these goals. Then, for each financial goal, one can work out which type of investment is needed. Once this is done, one can decide the specific investments within each type. 

Therefore, the first step is always to analyse your own life. Then come the goals, followed by the type of investment. There are other aspects apart from goals that you should consider. How stable is your income and that of your spouse? How is your health? Do you have any older dependants? Do you have any inheritance? 

Believe me, knowing whether small-cap stocks are going to be ‘hot or not’ over the next six months is completely unrelated to the things that should be the real inputs for your life’s savings as well as investment decisions. 

There is another, even deeper, aspect that requires you to know yourself. Different people seem programmed to suffer different amounts of stress and anxiety when they are invested in asset types that are volatile. This is partly a function of experience, of having been invested through a volatile period and then witnessing recovery. 

Investment advisers are fond of asking their clients about their ‘risk tolerance’. However, the answers are useless unless someone has had a real-life experience in facing losses. This is equivalent to many other life situations. 

Are you going to be brave when faced with a terror attack? No one knows the true answer till it happens. So with reactions when it comes to the performance of different types of investments