Any discussion surrounding investing lessons and philosophy, both new and old-age investors swoop down to share how much they have learned from Warren Buffett’s investing principles. While these foreign names have had their fair share of recognition, not many know that the art of managing money was intricate to ancient Indian management doctrines. Take Chanakya’s “Arthashastra” which translates to “The Science of Material Gain” talks about strategies that nations must adopt for all-around financial prosperity.
Chanakya is unlike the modern, well-manicured investors in today’s times. However, his articulated approach towards approach, especially, politics kept him head and shoulders above the rest during his time. Not that Chanakya’s investment lessons are anything new and novel, it is his investment lessons that underscore his sharp bent of mind that had a good understanding of how money must be earned and managed.
Some sharp investing lessons that you can glean from Chanakya’s teachings and incorporate into your next investment strategy include:
Always have a plan in place
You do not invest because someone asks you to park your earnings in a particular instrument. You invest because you are looking for returns. However, this is not possible if you do not know what you are investing for, why you are investing, the kind of returns you are looking for, the willingness to take risks if any and, last but not the least, your liquidity preferences. If you jump into investing without accounting for any of these principles, it is a classic case of poor financial planning. You are bound to be disappointed with the results, especially, when you are unable to sync your investments with your needs and may run out of cash in case of emergencies.
Do you understand the risks involved?
In investment parlance, we call it “risk appetite”. Are you accustomed to the ups and downs in the stock market or do you prefer to contend yourself with high-yield bonds and fixed-income plans? Do you know the downsides of the investment that you have just paid for or did you jump into it following the advice of your friends and peers? Ask yourself these hard-hitting questions before you sit down to plan your investment strategy. Remember how and where you invest your money and to what extent should depend on your risk-taking capacity, else you are likely to find yourself on the wrong side of returns.
Focus on what lies ahead
Many people invest in stocks listed on the BSE to benefit from the abundance and the diversity. However, the idea must be to focus on the sustainability of your investment decisions. Instead of fretting over what a company is doing now, check for potential growth of the company in another five to 10 years. If you believe that the company would perform in the coming years, you can move ahead to invest. Put your money not in the stock, but in the company’s business that you find worthwhile. The sustainability factor is something that you cannot dare to ignore while parking your earnings to earn good returns in future.
Don’t jump into the well to check its depth
You can learn a lot by simply observing what your friends and peers do. Simply said that not all experiences need be your own. Smart investors learn from the mistakes that others make. They ensure that they do not lose money by committing the same blunders as others. A common example is some new investors putting their money in penny stocks following recommendations from self-proclaimed finfluencers on social media handles. While there is no way to regulate their content, many investors find themselves on the wrong side of the market as the value of their investments continues to dip even after a prolonged wait in the market. The best idea is to learn about the market, the inherent value of a stock and factors that prompt movement. It is only after a clear understanding of how the market works, that should one invest in it.