Governments of large and small countries invest in intelligence. They want to keep track of national interests through that. There are early warning systems in any form of disaster management. That way, you get a lead time to save lives. If you observe animal behaviour closely, you will find that animals that hunt do a recce of their target much before executing an attack. All of the above are not one-off exercises. They are life-long tactics used to thrive.
Investing is also all about learning. You need to learn about developments that influence your money and investments constantly. Whether you are interested in finance or not, you have to be either an active investor or a passive investor.
Active investing
You must invest much more in knowledge if you are an active investor. The intelligence you gather about your target investment before putting your money on the line is essential. The more you know, the better. Similarly, to protect your investments, you need to track developments that could trigger a risk to your money.
For example, you must protect your investment portfolio against market cycles that see an upturn and a downturn. In a situation of an upturn, you should constantly know about opportunities that still have steam. Benchmark indices like the NSE Nifty and the S&P BSE Sensex are currently at an all-time high. You need to know about the quality companies trading at a relatively lower valuation than the overall market. It is not accessible if you want to do it all yourself. You need professional help to get the timing right.
Some individuals are experts in letting you know when to buy or sell companies. You may also want to explore fintech, which crushes data and throws up reasonably valued companies for you to pick in the stock market. Those into day trading already use technical tools for looking at resistances, bottoms, and stop-losses.
Active trading requires you to be on the ball. You cannot take your eyes off the macro and the micro view. That involves simultaneously looking at the big picture and the fine print to make a knowledge-centric investment decision.
Passive investing
You can be a passive investor if you think the above is not for you. You got to put your money to work, no matter what. Your savings need the right direction. Passive investing is relatively less risky than active investing. In legendary American investor Warren Buffett’s language, you will learn to get rich slowly. Investing regularly through systematic investment plans of mutual funds is the best way to create wealth without diving deeper into finance.
Even simpler is regular investing in index funds. That is called index investing. You must identify the suitable indices combination to put your life savings. While you can focus on the big picture information only and need not deep dive, you must still work with a professional advisor. You cannot just leave everything for your professional advisor to figure out. You must engage with the advisor to get the most out of your relationship. Knowing broadly where your money is going and how it is invested is a good idea.
If you speak to professionals, they are most likely to recommend a combination of active and passive investing for sustained wealth creation. One such method is to identify fundamentally solid companies that ride on India’s economic growth and invest them each month just like you would through a mutual fund.
You would benefit from the rupee-cost averaging as share prices move in cycles. There is a school of thought that recommends holding a core stock portfolio. You can generate a passive income through dividend payments if you invest steadily in these companies over your work life. Determine how much you should invest and where you must get professional help. In today’s world of intelligent technology and awareness, you cannot hide behind ignorance.
Rajas Kelkar
(The author is editor-in-chief at www.moneyminute.in)