In a social gathering, you can win a few brownie points for letting people know that you invest in stocks. Well, cool and sexy people dabble in stock markets, na!
Some people start paying a lot of attention on me when they come to know that I have invested in stocks. But the same people start avoiding me when I actually tell them the details of my stock investments.
The majority of my stock investments have been done 7 years ago. In 7 different stocks. I keep a tab on what’s happening in those 7 companies and review them after every 7 months (Actually 3 months, but I got carried away with the 7s)
Quite boring, no!
That’s one reason I don’t blog much on Stocks or Investing Gyaan 
Having said that, I want to share a few things that may help you get started with your stock market investment journey. However this post is not for day traders and those who believe that they can get rich quick with the help of stocks. It is for those who want to get the best returns possible with a long term perspective.
The Idea
Yesterday, I bothered Gautam Ghosh (The HR Guru) with a question on Money “Competencies”.
My question:
What would be the attitude, motives, values competencies for effective money management? (Background: Competency is the underlying characteristic of an individual that causes superior performance on any specific task, function , job or role.)
Gautam pointed me to a few areas like risk taking ability, ability to analyse opportunities, long term orientation, etc. Thanks Gautam.
The big learning was that just having adequate knowledge is not enough to manage your money. You also need to be aware of your attitudes, values, motives, self confidence before you swim around in the deep waters of stock markets.
Let’s take one at a time.
Knowledge: You don’t need to fully understand the capital market or portfolio management theory to get started. Start with reading about the 5 companies where you want to be the shareholder. I am tempted to recommend 7 companies but you can start with as many as you can handle. From 1-10. Let’s keep a cap at 10.
As you read about them, you’ll learn a few jargons along the way like EPS, PE Ratio, etc. Don’t be finicky about learning everything as if you have to answer a test paper. Don’t worry, it’s not rocket science but plain simple common sense!
In a few months, you’d be raring to invest in a few of them. Go by your instinct and go for it. Ask around for tips and you’ll be more befuddled than before!
Attitude: Many say that the stock market is a zero sum game where some people make money and some make losses. I guess, it’s true on a day to day basis. But on a longer term, good stocks help you make more money than others. Period.
So decide for yourself that whether you’ll be able to stay positive during the downturns. If the slightest tremors on the stock market have an impact on your own heart, it’s better you stay away. It’s not for the faint hearted, dear.
Skills: Skills normally require knowledge, attitude and practice. Infact if you have the knowledge and the attitude, skill automatically comes in.
It’s like if you have love and compassion, peace/harmony/happiness naturally follows in!!
The few skills I can think of are: Analytical skills, Operating the trading account/demat account and monitoring them. Simple, no?
A few more things like your confidence level, motives and value systems also contribute to your money skills.
Infact, your money competencies are a combination of your knowledge, skills, attitude and your overall orientation (Values/Motives/Confidence)
To my mind, it’s important to be aware of your own realities about the above competencies before you start investing in stocks.
Investing in stocks may be a good choice for some people. However, many people prefer FXCM.com over stocks since the market is open 24 hours.
Would you agree? Want to share your experience of investing in stocks?
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Nice post Ranjan!
I believe one quality a good investor should have is a dispassionate outlook towards stocks. But it’s easier said than done. We start loving some stocks so much that we don’t want to exit them in favor of some better opportunities. The hallmark of a good investor is objectivity.
I agree with the philosophy of buying for the long term. Market tremors definitely cloud our judgment but we need to move past that if we want to benefit in the long run. It is better to realise the importance of fundamentals early on itself even if people want to trade often I feel they should pick fundamentally strong stocks to atleast ensure some protection to their investments.
@Suryadeep: Objectivity would be a key skill. But I guess, either we are born with it or without it. I will be interested in finding ways to help people improve their objectivity.
@Sumi Fundamental analysis would be an important “knowledge” skill. Thanks for pointing that. Fortunately, it can be easily taught.
I really enjoyed the Competencies Required to Invest in Stock Markets » Ranjan Varma's Blog article, thank you. Please spend some time and visit my blog on india stock market
Investing is my way of earning money both online and offiline, right now i am into venture capital.,::
investing will always be a part of get rich programs, sometimes you need to be a risk taker to succeed.**-
it is good to invest in the stock market but you must be very careful and not speculate on rising stocks.*”,
investing could earn you lots of money if you properly invest your money`”~
investing is tricky, sometimes you win and sometimes you loss. Risk takers win of course ,”.
Sir,
I wants to invest in stocks ,
And don’t know what are the requirements to invest.
So will you please help me to understand the investment strategies.
Thanks you.