Dare to be dull: Things to watch out for before investing

Rajiv Goel
Bombay Capital Services

Most of us are impatient when it comes to getting what we want, and this includes everything from our next meal to a significant return on our investments. But is it really realistic to get a big return on a stock market investment or a real estate property we recently purchased? What about all those stories of flipping properties overnight or doing some magical stock trading in order to make a quick buck?

We don't deny that some have made money quickly on these kinds of investments, but we recommend looking at your investing as a long-term proposition. 

1. Know why you are Investing:

It always helps to know why you are doing something. Think about why you want to invest. Are you hoping to build up your nest egg? Do you want to quickly build up enough for a down payment on a home? Are you creating an income portfolio? Determine why you want to invest. Being able to point to a specific reason for investing can help you set the right goals and can provide you with a way to stay motivated as you move forward

2. Be realistic:

If you are creating an income portfolio with the help of dividend stocks, chances are that you won’t see significant income in 12 months. You need to be realistic with your investment goals. Whether you are investing money in a tax-advantaged retirement account elsewhere, you need to acknowledge the realities of your situation.. Expecting 20 percent returns might not be realistic.
You also have to be realistic about what you can do right now. Don’t grandly proclaim that you’re going to invest 50,000 a month when you aren't even sure if you have enough money for groceries.  Look at your situation, and set goals that are realistic.

3. Break it down:

Break down your investment goals into achievable milestones. Investment success is hard to come by if you find yourself constantly frustrated about your lack of progress. Start out small, with a reasonable monthly goal and then step up your investment after a couple of months.

Also, keep your focus on making slow, steady progress rather than amassing some specific amount years down the road. Instead of telling yourself you need Rs 1 crore in your retirement account, break it down to a monthly investment (with a realistic expectation of returns). This will make the goal much more manageable, and you’ll set yourself up for success.

4. Start simple, with something you know:

As you begin investing, start simple. Don’t just jump into stock picking, or decide that you want to trade forex. Instead, begin with something simple, that you know. Begin with a broad index fund. Make regular investments   to the index fund while you research other investments. 

The desire to outsmart financial markets is practically impossible to resist. Yet in reality it's not the market investors are trying to outsmart -- it's simple arithmetic. Considering that 90 percent of investors think they are beating the market, I think it's safe to conclude that somewhere someone’s math is fuzzy, else we would all be trillionaires.

Personally, I would rather dare to be Dull - Ionaire.

The writer is a CEO at Bombay Capital Services