Please find below our key excerpts from ithoughtwealth YouTube video. In this video, 2 of the stalwarts of finance industry are discussing about the common mistakes which an investor make in his/ her starting phase. (Emphasis ours).
In every market cycle new entrants come into the market they experience investing in the stocks and different derivatives of stocks and this is probably the cycle (Post Covid) in which the maximum number of new entrants have entered the Indian stock market.
There is a trend: After every market cycle a number of these entrants don’t stay in the market. Longevity of investors is the most important thing for the health of the market.
Longevity mantra for millennials to stay in the market: Investing has to be built in your lifestyle. It has to start small. You can’t risk everything and lose it in the market and then wait for it to recover.
For example: If you earn 20k a month you should not be staking 2k rupees a month. That is the way to start small. Lose small and learn in the starting. Jot down your mistakes and experiences from your mistakes. Always keep in mind Experience can’t be taught, you have to go through the cycles and experience it that’s why start small otherwise you won’t be able to handle volatility of the market.
In equity markets everybody thinks they can give their view. There is something called beginner’s luck so people who haven’t seen drawdowns and made money in bull runs need to keep their feet grounded and realize the difference between skills and luck. You have to constantly use this “was it skill or was it luck?”
“N” is important in investing (Number of years). Can you make 12-15% for 30 or 40 years? That is important, not the 50-60% which you made in 1 or 2 year.
Things to avoid in starting phase of your investing:
Don’t leverage & Don’t do options & futures- Invest what you have. Market is a very very tempting place when you do a small leverage and you make money you think you are very smart you do more and more leverage till one day you get wiped off.
Your EMI should not come from the appreciation of your portfolio.
Don’t try to copy anyone else's portfolio: If you don’t know why an ace investor has bought a stock/ his thesis on that stock then don’t buy that stock.
Risk reduction is a very important thing in wealth preservation.
Some bull markets create a cult following for equity as an asset class. More people across different sections of society aspire to get into equity so they all start, try their hands and some get success within a short period of time.
In 1992 investors were going into market ecosystems but now the market has gone into investors' ecosystems. Doing transactions in 1992 was a very time consuming and hard job.
It is very important to be very disciplined as an investor. In euphoric markets you need to reduce your risk & book profits before the party ends.
Watch full video here: https://youtu.be/MUMFC0AGhSQ & https://youtu.be/wk5jNydp_h8