Your weight-loss regimen can teach you a lesson or two about how to keep your investment portfolio in shape. At a time when the stock market is giving indications that a rally is just around the corner, good investing habits will go a long way in helping create long-term wealth.
The truth is that you cannot lose 40kg in a month without putting your body at risk, and should be wary of individuals or institutions that make such claims. Similarly, don’t expect your money to double in the stock market in a short period without taking on enormous risks. Those who promise you instant gains are probably quacks. You need to be realistic about the outcomes that you can reasonably achieve through investing in stocks. Becoming a millionaire overnight is certainly not one of them. Long-term wealth creation through the stock market only happens over a long period.
Learn patience and endurance
Real weight loss that one can sustain over an extended period of time can be achieved only by going about one’s weight-loss routine patiently. There are no short cuts. The same is true with investing. Sustainable wealth creation comes through patiently letting your investment thesis mature, even if it takes a few years.
Additionally, most overweight people know the futility of weighing themselves on the scale every minute of the day. Measuring at this frequency will hardly reflect anything other than noise. Sustainable weight loss does not occur just because you measure yourself regularly.
Similarly, as investors, we must get out of the addictive habit of looking at intraday prices throughout the trading day. It is nothing more than noise. The fundamentals of a company’s performance don’t change every minute that they get reflected in intraday price movements.
Decide your investment diet
Ask any experienced weight-loss expert and he will tell you that sustainable weight loss occurs only if one is willing to make a long-term change in one’s lifestyle, and more importantly, stick with the chosen routine. One doesn’t follow different diets all at the same time. Stock market investing is also about picking one investing philosophy and sticking with it in the long run.
Often, the earliest days of a weight-loss programme are the hardest because one does not see immediate results and then gets demotivated and reverts to one’s old habits. But true believers stick it out. Similarly, you can’t decide to be on one type of “investment diet” one week and change your style the next week because it’s not working. Sometimes it might appear that your investment plan is not working but over time you will see the results, on the basis of which you can decide whether to continue or change your investing style.
Have discipline and willpower
Successful weight-loss programme participants talk endlessly about mental discipline and willpower. Most retail investors in stocks cannot resist the temptation of investing in the latest rumour and tip. But this is usually a sure way to lose one’s savings and often leads to wealth destruction. Exercise mental discipline and avoid investing in every idea that is thrown at you. Pick your “investment candy” wisely. Don’t let your emotions overcome you.
Dhruv Agarwala and Kartik Varma graduated from Harvard Business School and are co-founders of New Delhi-based iTrust Financial Advisors.
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