In this fast paced technological world, investing has been made relatively easy.  You have many ways to invest like doing paper work, going online and even using your mobile phone by sending a short message.  This is a change that has to be applauded.  But that alone does not help you to become a successful investor.  To recall a famous saying, “Investing is not a 100m dash ; It is a marathon”.

To be successful in the world of investing, you

a)      need to stay prepared

b)      need to be process oriented and

c)       need to be patient

Prepare –

A couple of years back, Andy Murray the No.1 Tennis Player for Britain was having a crack at the Wimbledon title, during which time he had attempted a brave shot in vain.  A TV commentator immediately said that “These kind of shots have to be executed only with adequate practice, otherwise, you cannot execute with precision”.  In this case, practice is nothing but preparation.  Similarly, a very good attentive student cannot come out with flying colours in the examination, if there is no adequate preparation.  Preparation is the key to any task and investing is definitely not an exception.

How do you prepare yourself before investing ?  The answer is to ask the right questions !

1. Why am I investing ? (This puts a lot of emphasis on goal based investing.  Always ensure that you invest for a need or a goal.  This will eliminate indecisiveness & confusions)
2. What should be my asset allocation ? (Equity : Debt, I am not including real estate here just to avoid further complications, as there is lack of transparency and regulation).  This is not an easy question to answer as no single rule fits all individuals.  In general, allocate more towards equity for long term goals and avoid equity for short term goals.  Sticking to a 70:30 Equity:Debt for medium to long term goals is a safe bet.
3. How and when I should review the performance of chosen instruments ? Review once a year and actions once in 3 years can be a general guide.

If you are taking the services of a Financial Advisor he / she is well equipped to answer all these questions.  The onus is on you to ask these questions and get clarity.

Process –

The next important step is adopting a process or applying filters.  As said earlier, if you have a Financial Advisor, then he/she has a process of identifying your goals, risk tolerance & filter out instruments to match your goals and risk appetite.

With preparation, you have a list of your goals & asset allocation models.  The next step is to adopt a process & applying filters  to choose right instruments.

If you are choosing bonds, NCD or fixed deposits, choose credible brands than going for an extra 25 or 50 bps.  There are rating agencies providing information for all these instruments.  Understand the ratings and take a decision.

If you are choosing a mutual fund scheme, choose schemes that are following their objectives and delivering consistent performance across different market cycles. Consistency in returns is the most important ingredient to successful investing, rather than outperformance in bull cycles and pathetic performance in bear cycles.   Stick to brands that have a history and trusted by many investors.  There are lots of online portals available to check these information.  Do not get carried away by the ratings awarded.  Find out the objectives of the schemes, study the portfolio and analyze past performance.  Then check whether the scheme is suitable to any of your goals and then decide to buy. Always choose systematic investing when it comes to equity or balanced schemes.  If you have a lumpsum then invest in a liquid fund and do a systematic transfer to equity or balanced schemes.  Systematic investing is a time tested method that does not require further research.

If you are choosing any other instrument, then ensure that there is a regulator in place.  There are lots of unregulated instruments available in the market that can make or break your life.  Stay away from instruments that is not overseen by a regulatory body.

Patience –

Wikipedia describes patience in the following words . . .

“Patience is the state of endurance under difficult circumstances, which can mean persevering in the face of delay or provocation without acting on annoyance/anger in a negative way; or exhibiting forbearance when under strain, especially when faced with longer-term difficulties”

Once you are prepared and ready with a process of choosing instruments the next obvious step is to invest or act.  Once you have acted upon your ideas, it is of utmost importance to be patient with your beliefs.  Inaction is the best action most of the times.  Hence, churning your portfolios too often or jettisoning your investment mid way through will not help you in any form.  One of my friends recently highlighted this in a simple way – “When you are inside a lift, you have to be patient ; jumping inside will not take you to the next floor”.  So ignore noise that keeps knocking your doors regularly, be clear on your goals, adopt a strategy and stay with the strategy to reap the benefits.

With these three vital Ps, you are sure to transform into a successful investor.