K. ARAVIND
Financial planners need to have basic financial knowledge. This will help in adjusting the investment in different periods and selecting different asset sectors according to the risk readiness. But in addition to all this, another knowledge is needed. That is the knowledge of self.
One’s nature is a factor that affects one’s investment style and choice of assets. Individuals react differently to each situation according to their nature. Some may be emotionally devastated by adverse circumstances. But there are others who are eager to deal with such situations with balance. There is also a difference in terms of investment.
Warren Buffett, a guru of investors, is famous for saying, “Fear when others are hungry, and be greedy when others are afraid.” But how many people show this attitude? How many people take advantage of the opportunities that come with a sharp fall in investing avenues such as the stock market? Most people are worried about the loss. Those who seize the opportunity to take advantage of the occasional opportunity will always be in a minority. Anxiety eliminates the possibility of better gain. This is how the nature of individuals influences investment.
Understanding yourself is the key to success in investing. You can understand the your nature as an investor through the three questions of what, how and when.
By asking yourself what you do as an investor, or what investment products and services you own, you can identify where you stand as an investor. If you are a person with only provident fund and a few savings as investment then you need to understand that you need to go a long way in financial planning. If your total wealth is a portfolio that has lost a lot of non-standard stocks, then you need to realise that you are taking unnecessary risks.
The next question is how do you invest. If your investment is systematic through means such as the Systematic Investment Plan (SIP), you will know that you have a basic plan. If the money is invested together in any asset sector, then there is a flaw in the planning.
The question of why you are investing can help you understand your goals. If your investment is not related to goals then the realisation of life goals may not happen in a timely manner.
