
Lessons Learned Before Buying
I had initially invested in stocks out of curiosity and to learn the process. In fact, I worked out an Excel formula that helped me reap some considerable profits. However, since it took up so much time, I eventually exited the market. Like any investor, I had my ups and downs, but I did well. At the insistence of friends, I am now going to outline some of my experiences in the stock market—histories of both success and failure. However, this topic can’t be fully covered in just one blog post. It may require a series to dive into all the details. Stay tuned for future articles!
For most, investment in stocks is another euphemism for overnight fortunes, while for a few, it calls for responsible and concerted effort towards the ultimate accomplishment. It’s not about jumping in; it’s about evaluating, planning, and staying true to one’s financial objectives.
- The Importance of a Personal Finance Assessment
Before buying any stocks, understand your financial foundation. Obvious, perhaps, but this is the very bedrock of sound investing. First and foremost, I needed to have a real idea of what my current standing was, financially. One quote that always stuck to my head is by Warren Buffett: “Do not save what is left after spending; instead spend what is left after saving.” This emphasis on setting aside a portion of the income for investment helped fix me through market highs and lows.
In India, where most investors get into equities without a well-framed financial plan, I realized I had to have clear goals. Is this portfolio to generate long-term wealth, or am I after shorter-term gains to reinvest? Understanding my goals meant an evaluation of my risk tolerance, which fluctuates with personal circumstances. For instance, a friend of mine used to invest aggressively in the tech sector in his twenties. As he got married and had children, his appetite for risk would obviously fall. Curiously enough, this journey was similar to mine where I wanted high returns initially, but later changed the goal to a balanced approach in order to hedge volatility.
- Determining Investment Goals: Why Do You Invest?
Investment goals are personal, unique, and importantly, realistic. I remember reading about this young investor who got inspired by movies like The Wolf of Wall Street and overnight wanted to “Make it big.” But with investing, that is not about realistic expectations. While movies and other forms of media dramatize overnight success stories, the actual strategy is in steady creation.
For instance, I always wanted my portfolio to be diversified enough to take care of my family in case of an unseen financial emergency. That kept me pretty anchored initially when I started to feel that maybe I was being extremely cautious as friends were taking higher risks and sometimes larger short-term gains. Setting clear goals buffers against impulsiveness, and as Peter Lynch, one of the most iconic investors, has reminded investors, “Behind every stock is a company. Find out what it’s doing.”
- Assess Risk Tolerance: Know Thyself and the Market
In the stock market, “No risk, No gain” too often steers new investors astray. The hard way, I learned my tolerance for risk wasn’t as high as I thought. One important pivot took place when, throughout one market decline, I suffered losses. At the time, it just about felt like the end of the world, but then I reflected upon my reaction to it. It was this process that really taught me that one’s risk tolerance is just as much a psychological factor as it might be a financial one.
The incident that comes to my mind is the financial crisis in 2008. The large number of investors lured by rapid returns were incredibly affected where the ones aligned with their risk profile managed the crisis ably. I still remember hearing of a case of an Indian retiree who had put much money in equities, completely neglecting his volatility that came with his age and dependence on fixed income. This story really reminded me of knowing my limits.
- Factoring in Time Horizon: The Secret to Strategic Decisions
Time horizon is vital and has a deep impact on any investment decision. During the early years of my career, I had no idea about the difference between short- and long-term investment. A mentor once taught me, “You don’t plant a tree and then move it every season. You leave it to grow.”
In India, with so many families struggling to make ends meet, time horizons are different. At one of the most important financial decisions in my life, I invested in an established company that had suffered a setback. Though it had less than optimistic prospects in the short term, I knew the company’s fundamentals were sound and held onto the stock. Over time, my patience was rewarded. This taught me about the power of long-term investing, especially in a volatile market.
Warren Buffett—an ultimately recognized long-term investor across the world—created wealth through his identification of undervalued companies and holding the stocks through market fluctuations. His strategy of patient investment indeed inspires me to make well-thought-of decisions and steer clear of any rash action during stormy weather.
5. Financial Situation Review: Changes in Regular Intervals
One mistake I often find with new investors is not rechecking their financial situation. Life happens—promotions, family responsibilities, health expenses—all alter our ability to and how we invest. Just like we revise goals for our health or plans regarding our careers, our financial strategies, too, need to change.
For instance, an unplanned financial crisis taught me the importance of keeping some funds liquid. This experience has since then made me take into consideration the question of liquidity before making any investment in stocks, more so in those sectors that could take some time to yield returns.
Abroad, investors in markets such as the United States regularly rebalance and reassess their portfolios. Take, for example, the “All Weather Portfolio” concept by Ray Dalio, which espouses the idea of a diversified portfolio to weather whatever economic season arises. Although this was an intensive approach and one for which I was not looking, I grasped the general principle underlying the whole work: check on it from time to time and rebalance. This served to remind me in uncertain times to gradually distribute more into safer investments.
A Final Thought: Patience, Prudence, and Perseverance
My journey has been a mixture of excitement and caution, high stakes and long holds. For those who would enter the fray of the stock market, my advice is simple: respect the fundamentals. This mantra holds good in India’s fast-evolving investment landscape.
Finally, investment is a marathon rather than a sprint. Much as a farmer takes care of his crops through seasons, so must an investor take care of his portfolio with patience, discipline, and a view regarding long-term rewards. As an Indian proverb goes, “Be like the tree that grows slow, and provides shade for those who seek it.” The road may be challenging, but the rewards are well worth it.
Dr. Prahlada N.B
MBBS (JJMMC), MS (PGIMER, Chandigarh).
MBA (BITS, Pilani), MHA,
Executive Programme in Strategic Management (IIM, Lucknow)
Senior Management Programme in Healthcare Management (IIM, Kozhikode)
Postgraduate Certificate in Technology Leadership and Innovation (MIT, USA)
Advanced Certificate in AI for Digital Health and Imaging Program (IISc, Bengaluru).
Senior Professor and former Head,
Department of ENT-Head & Neck Surgery, Skull Base Surgery, Cochlear Implant Surgery.
Basaveshwara Medical College & Hospital, Chitradurga, Karnataka, India.
My Vision: I don’t want to be a genius. I want to be a person with a bundle of experience.
My Mission: Help others achieve their life’s objectives in my presence or absence!
My Values: Creating value for others.
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Heartiest congratulations Dr.Prahlada Sir,
on your multifaceted successes!
Your exceptional ENT surgical skills, captivating wildlife photography, and impressive stock investing acumen inspire us all.
Your remarkable achievements, Sir, demonstrate that success knows no bounds. We're grateful for your leadership, inspiration, and generosity in guiding others towards financial literacy.
Sir, your camera captures stunning wildlife moments, & your investment strategies 'capture' impressive returns!
Keep inspiring us 👍👏🫡.
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