How to stay rich - Learn from a computer science engineer cum investor
There are two things - getting rich and staying rich. Here, we led a computer science engineer who is happily sharing the difference between these two. Anupam Roongta, a SEBI registered Research analyst is coming from The Pink City, Jaipur. He got investment Mantras in his blood from his father who is investing since 1978. Let's listen to him. Time to pass the ball to Anupam so he can share his journey in his own words.
Why did you go for Investment instead hot cake Day Trading?
The human mind craves excitement and entertainment. But we forget that entertainment has got a cost to it. For example, when you go to watch a movie, you pay for it, you do not get paid for it.
Also, there is a huge difference between Getting Rich and Staying Rich.
I have seen traders getting rich. But in my limited knowledge, I am not aware of a trader who stayed rich for his/her entire life, through trading.
Whereas I know a lot of long-term investors, who follow fundamental analysis, who stayed rich for their entire life.
That was the motivation to become an investor.
By the way, we define long-term investment as a minimum of 5 years of investment. The following two quotes will help the readers to ponder over this approach.
Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas. - Paul Samuelson
Short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children. - Warren Buffett
Can you share the Pros and Cons of investing as per your personal experience? If you do so, our reader will love it.
Cons are more important to know. That is, if you are aware of the cons (challenges), you can be prepared for it. If you know what not to do, you would automatically know what to do.
Cons:
- Life is uncertain. Even if you plan to invest for the long-term, some or the other unplanned expenses may come up and you may have to sell your stocks. This impacts your financial goals and long-term wealth creation journey. The solution can be to have an emergency fund of at least 6 months of your expenses.
- In investing, temperament (a broader term for patience) is more important than knowledge. It takes time for an investor to develop the required temperament.
- Since very few people invest for the long-term (that's why very few create wealth in the stock market), the number of reliable advisors are also less.
Pros:
- As an investor, we can take advantage of volatility. When our portfolio stock goes down, we know it is wise to invest more (and since we have done thorough research, it gives us the conviction to invest).
- Whereas a trader might lose patience and peace of mind, and end up selling in a loss.
- Wealth creation is attainable through long-term investing, irrespective of your investment amount (as time plays a bigger role in compounding).
- One doesn't need to sit in front of the system (or screen) to monitor the investments daily.
If I want to invest money, how can I do the analysis to find a good company to invest in?
Well, there are many criteria that we look at while shortlisting a stock.
Out of approx. 6,000 companies listed in the stock market, hardly 30 companies fulfil these criteria. We further do thorough research on these 30-odd companies to invest in 6-9 stocks.
The research process is detailed and cannot be shared in brief.
Traders talk a lot about psychology, do you think it also plays an important role in an investor’s life, if yes, how does it differ from a trader?
An investor looks at stocks like a business. After all, there is a business behind every stock.
Whereas, a trader looks at a stock like a slot machine (in a casino).
The business approach helps the investors to have a long-term vision of their investments.
Do greed and fear play an important role in investment also as it is in trading?
Yes, it does.
Apart from looking at stocks like a business, the investors should note that when they invest in stocks, they become a business person too (irrespective of their profession).
Therefore, they must think like one.
This insight was shared by Warren Buffett: "Be fearful when others are greedy and greedy when others are fearful."
When it comes to business, being rational (in a way being 'fearful' of impractical decisions) is crucial. At the same time, being courageous (greedy), when an opportunity comes, is a rare quality.
Message for the fellow investors.
To get the desired results as an investor, invest as per your goals, and stick to your investments until your financial goals are met. This would also help you remain focused on your investments and save you from speculation/ hot-tips floating in the market.
Stock Market can be taken as a gamble, or as an investment. We all know the end result of a gamble.
Choose wisely..!!
One can follow Anupam on his website as well as can check out his Twitter, Facebook, FB Group and Linkedin Profile for regular insights on Investing Opportunities and learning.
If you like this article, don’t forget to bless it with your tweets or shares on your favourite social media. Further, you might like to read Following Trading Journeys:
Chartered Accountant turned full-time Trader - An inspiring Trading Journey
An MBA Specialized in International Business Turned Full-Time Trader cum Investor
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