How to steer clear of the bull market talk:
Share prices are rising to staggering levels. Maybe it’s an understatement to go back and look for a little over a year. Investors are eradicating the second wave of the COVID-19 pandemic and the economic problems it poses in everyday life. The year 2020-21 is the worst year in history for economic growth. However, there is something investors need to do that most people in India cannot see.
After all, if everyone had the same information, most of you would have invested in the stock market on March 22, 2020, when stock prices peaked. There are stories in a bull market. They start with something like “If you had invested xx in the ABC business a few months or years ago and you would eventually become a millionaire.”
The other series of stories is about fear of losing or FOMO. “You missed a meeting in your life” or “Young people make money, where are you?” are some examples. These stories may be true. All of these ideas are mentioned in this column to explain why investing is more important than just saving money.
Those who are actively working on the stock exchange will continue to do so. However, this week’s message is more convincing. Watch something spectacular happen. But there are a few things you need to remember before taking the first step to getting over the fence.
There is a lot of information asymmetry. Those who work in the market know what it takes to make and lose money. They also have a story and a feeling. They have access to the data and know more than you.
However, if you talk to a stockbroker, they will tell you that only 20% of all registered investors are actively trading the market. This number may not exceed 60 or 70 lakh. It is relatively small when you consider the hundreds of middle-class people in India.
That does not mean you have to sit down. The only way out is to become aware of things. Although it is almost impossible to know everything, you need to know valuable information that can help you.
to rationality. Several authors, for example, have argued that money makes us emotional. To explain this, Nobel Prize winner Daniel Kahneman writes in his book Thinking fast and slow that our brains have two sets of cognitive configurations.
What can you do
Do not be in a hurry if you are a new investor. Analyzing your savings, investments, and spending habits are the first step: one drives the other. The next step is the definition of financial objectives and a structured investment approach. There is a lot of literature on online personal finance. You can watch videos, read books, or follow influential people to learn more about the three fundamental pillars of your money. The other thing to do is to hire a professional financial advisor. The most important thing is to think about money and not the other way around.