18/06/2017
Happy Fathers Day!
"5 investment lessons which your dad gave you but do you remember"
A father is your first teacher and guide into the world of finance. He is responsible and accountable for all the financial wisdom of the family.
Naturally, from your childhood, you are coached into financial intelligence by your father, without even formally making you aware of these financial disciplines. How well one shapes up financially is quite largely governed by their fathers influence on them.
We go down memory lane on some of the common financial basics and wisdom that our fathers would have inculcated in us; however, with time we might have diluted their importance.
On this special day, its time we revisit them and rekindle these learnings into our investment decisions and review their importance. Don't forget to wish your first investment guru,
Have Realistic Desires (goals)
Foremost of the learnings in our childhood used to be to have realistic desires be it as basic as pocket money, or spends on our clothing etc. Similarly, when we look at our investments, we need to be realistic on the returns from our investments and the time horizon for the investment.
Quite often we get unrealistic on the returns or time expectations or both thereby turning a good investment into a hurried self-generated loss.
Do Your Homework Diligently
Our school homework will always be an area where our fathers would spend alot of time on us and ensure we do them diligently and correctly. Our homework used to be the basis of our performance in our curriculum.
Likewise, for each of our investments, we should be doing our fundamental and technical homework diligently, before putting our hard earned money to it.
Often we invest based on tips from friends or colleagues, this is equivalent to copying our homework from others when we havent studied well. This can easily lead to we paying the price for the mistakes of others when they wouldnt have done a diligent homework.
Dont Spread Beyond Your Means
Throughout our childhood and even beyond, our fathers have always conditioned us to living within the means and not spread beyond them, be it the kind of cycle he can buy for us, or the kind of vacation we can go for and so on.
This is one of the most important learning that we should never forget. Often when it comes to markets and our investments, we get carried away.
Many times, based on our over expectations, we dont discipline how much of our savings we should invest, at times we put all our savings (even our emergency funds) or even go for leveraged to invest into markets.
We need to discipline and carve out only those amounts into investments that we can afford to risk, not to go beyond our risk appetite.
Patience Pays
Quite often when young we would be impatient, want everything upfront, be it reaching a destination during a travel journey or eating our favorite food, we are always in a hurry.
As we grow up, our impatience continues and now with our investments, we want quick and larger gains. This is unrealistic as with the travel journeys in our childhood.
Every journey has a time horizon, investments are madeinto assets that grow at a reasonable pace and it needs to be nurtured with the virtue of patience.
We hear stories of unrealistic gain in unrealistic timeframes from others, and start expecting the same, there is more to it than just the outcome in such stories. Patience is key and important for a deserving gain on our investment.
Live a disciplined life
The one person responsible for introducing the concept of discipline in our life has always been our father. There is no end to examples of bringing in a disciple of eating on time, sleeping on time and so on.
Like in life, investments require a high degree of discipline for us to derive the right benefits out of our investments.
A discipline of defining the target return and sticking to it, defining the amount of risk we can afford, the concept of a strict stop loss, the amount of exposure to a particular investment, appropriate and disciplined asset allocation, prudent risk management over panic etc. are some of the key areas of disciplined investment strategy.
