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!
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.
Yesterday, I bothered Gautam Ghosh (The HR Guru) with a question on Money “Competencies”.
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.
Would you agree? Want to share your experience of investing in stocks?