Thursday 31 January 2008

while investing stay focused on future goals.

While driving a car, one needs to see in front. If a driver only looks in the rear-view mirror, then he is bound to have an accident. This is true of investing too. Do not invest by just looking at the past performance of an asset class. It is often observed that an individual, who is reluctant to invest at 3250, shows extreme eagerness to invest when index touches 14000 and falls to the 11000 level.
At 11000, he recalls the last level of 14000 and finds the current level attractive. He forgets that at 3250 he did not see value in investing. While investing, stay focused on future goals.
These investors panic if markets fall by 15-20%. This is because their investment strategy was not based on their financial goals but it was based on “...what others are doing.” Secondly, they were reacting on past information.
The past can be a guiding post but can never be a driver of future growth.
Stock markets have cycles. Everything that goes up has to come down. Even the current rally will come to an end sometime. If you have stayed focused on your financial goals, you need not panic or go overboard with greed.

1 comment:

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