Investor management is all about managing yourself rather than your investments.
There’s a famous saying: ‘mind over matter.’ And this is true for investors too.
Taking positions in the stock market, holding on to them, or letting them go quickly, are all reflections of what is going in our mind… Hence, to succeed in the market, more than anything else, one needs to master their own psychology…to guard themselves from being too hasty or too complacent.
Being in the stock market is about being able to take and absorb risks, to win and lose, and then get ready to win once again… It’s about building your resilience – emotional, mental and financial.
With this goal in mind, the firms like ours focus on investor management first, and investment management second.
As we help you to analyze and understand the market, we also help you understand and map your behavior as an investor… Are you being too hasty, investing too much, and then getting out too early?
Just like the market needs to be tracked, so do your emotions and reactions to it as an investor… This is termed ‘investor management’ – the ability to guide investors, and prevent them from making big mistakes, that could eventually lead to huge losses.
As you understand your own strengths and shortcomings, you are then able to overcome them faster, and work toward a lifetime of longevity and profit.
This phenomenon has given rise to ‘investor management’ firms, like ours, that help you build resilience and tolerance to a volatile market…
We help you to sharpen your decision taking behavior…
As an investor, you need to first identify how you are taking decisions – Are they based on past experiences…of previous losses incurred in the market? Or, are you following the herd, and buying scripts that you don’t understand and believe in?
The most obvious example of acting on past experiences is that you may buy maximum quantities if you have gained from your last trade; or you may become conservative, and buy minimum quantities if you have lost in your last trade.
But it is anyone’s guess which trade will give you the whole year’s earnings…
For example, If you’ve conducted 10 trades and faced losses from 7, and gained only from 3, still you need not worry about how much time you lose, but you should focus instead on how long you can hold your profits, and how quickly you can cut your losses.
Even if your success ratio is only 30%, try to ensure that the losses are low, but the profits are high and unlimited.
Total trade: 10
Winner trades: 3
Loser trades: 7
Profits in each trade: 5rs.
Losses in each trade: 1rs.
Total profit: 3*5 = 15 rs.
Total Loss: 7*1 = 7
Net Profits: 15 – 7 = 8 rs.
This is how you can conduct your trades and create a formula to follow in the stock market.
Your trading behavior or ‘discipline’, should essentially not be determined by the herd, but by the ability to keep your portfolio in profit.
It should also reflect your personal risk appetite, and be in proportion to the funds you can deploy at that point.
To hone your investor psychology, here are some pointers to keep in mind…
1. Start accepting your losses – There is no point allowing in self-pity; once the loss is incurred, take trade, and start taking steps to rectify that mistake.
2. Determine your mindset – Don’t blindly follow the herd; determine your own threshold and appetite for risk.
3. Stop averaging the losses – Be realistic…when you see a trend fall, start exiting the trade and avoid more losses… Don’t stay on too long, or buy more quantities to average your losses.
4. Proper Allocation – Depending on the size of your portfolio, and the reasons for investing, you will have to determine appropriate allocation for each stock.
5. Don’t be too rational or too emotional: Swinging on either side of the pendulum is dangerous. Evolve a balanced decision-making process by gaining adequate knowledge.
These elements together will help you focus on investor management, and not just investment management.
Reliance Mutual Fund has been one of the most successful mutual funds in stock market history, resulting in a 19.7% CAGR average p.a. in the last 20 years.
The surprising fact, though, is that only 2% of those who invested in Reliance Mutual Fund actually earned from it and mostly the same scenarios with other mutual funds too.
That means almost 98% of investors lost their money.
The main reason for this is that retail Investors/traders were unable to control their emotions… They got impatient and took out their money too early.
The lure of instant gratification often prevents us from holding on to a stock and looking at a 10/20-year time frame.
At Nifty Millionaire, we have created India’s First Financial Open Network – Nifty Millionaire Tribe.
Here, you can
–Directly interact with professional traders and retail investors.
-This Platform will help you take more rational decisions rather than emotional ones.
-The community of traders and professional investors will track your trading patterns
–Sound caution when needed, or encourage you when on the right path.
-The platform also gives you live updates about the market’s current scenario,
-It is helping you to create a disciplined mindset.
Ultimately, it solves one of the biggest problems – Transparency… On this platform, everyone is connected with each other and can able to share knowledge in transparent manner.
Our focus for creating this platform is to create a community of disciplined traders and investors.
Our Second Platform is ProfitGyan – India’s First Personalized Risk & Reward management system.
-Profit Gyan is the system which can help you overcome your emotions and in-discipline.
-Our investing decisions are mostly based on our past experiences. But the system Profit Gyan now will give you all the detailed information.
-It will guide you on aspects like – How much to allocate to a particular script, and how much risk you can take based on your allocation.
Find below a sample trade of Profitgyan’s Personalized Portfolio management System,
‘Positional: Mr. Amit please buy 88 shares of KIRIDYES at 283, SL:260, TP:tgt later.’
*Quantity is decided as per 100,000 capital
To become the next Rakesh Jhunjhunwala, you will need to think like him…if not invest like him. Even then there’s no guarantee you will become as rich as Mr Jhunjhunwala, but you will definitely evolve as an investor, and become better at managing your portfolio.
Come develop the investor’s mindset… Experience the Platform, and let’s together benefit from the buoyant Indian markets!