TLDR: Successful investing is more psychological can skill - here is why

During the weekend I was discussing the current state of the market with some friends. There are a lot of reasons to be concerned, but then that is always the case isn’t it? One friend pointed me to a blog post and something called the “The market Cycle of emotions”

It is very good post and details the importance of the conviction and patience.

This chart summaries the typical cycle that most investors follow in their investment journey.

You can read about the different stages in the blog post. I am not going to regurgitate the same here but the lesson that we learn from this is

• All of this is transient and temporary, it will pass.

• If you have a solid plan and clear demarcation of time horizons tied to your goals, you have nothing to worry

• Investments carry risks, accept it, appreciate it and imbibe it completely

• If you cannot stomach is 40% fall on your portfolio, then you are not ready to invest in the stock market. Move to a more conservative portfolio, reduce exposure to equity. Be aware that risks and rewards go together and you are foregoing some reward for peace of mind

• Volatility is part of investing in markets

• Automate your investments, so that you are not tempted to change or modify your investments based on market cycles

• Do not touch your SIPs, they need to continue especially during corrections so that you benefit from it

• Stop viewing financial news, stop tracking your portfolio daily, stop second guessing yourself

Conclusion

Market cycles are a natural part of investing in equity, CAGR of 12% doesn’t mean you will get 12% linear growth year on year. It will have ups and downs. Go with the flow and you will come out on the other side happier and wealthier. Investing, especially long term investing is a marathon not a sprint, do not look at the current speed, but ensure that on an average you conserve your energy and stick to your pace to reach the finish line.

Happy investing.