The Problem

We live in times of extreme consumerism. One wants to flaunt the latest iPhone within hours of its launch and update it on their social networking sites. The trend is to frequently change gadgets, cars and jobs; not necessarily in the same order. But, change is the only constant that you seem to believe in seriously. The ‘I want it now’ belief works when consuming—it does not work when you are investing money. Warren Buffett’s wealth started to double and grow manifold over the years he kept investing and he became a billionaire only when he turned 56. Investments take time and anyone promising instant results is akin to the many weight loss fads that float around. Don’t be trapped into believing money will double in short time.

Example

You start looking at the NAV of your fund within days of investing or look up the stock price of the stock multiple times a day. Yes, some of them have the potential to grow fast, but that comes with its share of risks. Think of investments like the birth of a child—it will take its due course before the result is out.

Suggested intervention

Do not be restless with your investments. Just the way you do not measure the growth of a plant each day, because it takes a while to grow—invest with a time horizon and defined objective and let it reach that goal in its natural course. Every financial instrument comes with a suitable investment time frame and associated risk, by matching the two, you will benefit from the most desired outcome. By frequently changing your investments, you will be incurring charges and also taxes, which is avoidable if you stay patient with your investments.

Tip

Learn to defer financial decisions that involve spending. Understand the difference between needs and wants as early as possible when it comes to financial decisions to judiciously use your money.

Read: Inside the Mind of Investors

olmdesk@outlookindia.com