The First Step In Investing – Know Yourself First(KYF)

 In my 15 years of experience of interacting with 8 to 10k investors, I find that if there is one thing missing among most investors, it is self-realization.

Self-realization is crucial for investors for several reasons:

• Understanding Personal Goals:
  • Self-realization helps investors identify and understand their financial goals. Knowing what you want to achieve with your investments is fundamental to developing an effective and personalized investment strategy.
• Risk Tolerance:
  • Investors have varying levels of comfort with risk. Self-realization allows individuals to assess their risk tolerance accurately. This, in turn, influences investment decisions, ensuring they align with the investor’s comfort level.
• Investment Time Horizon:
  • Knowing oneself helps in determining the investment time horizon. Different goals may have different timeframes, and understanding one’s own timeline allows for appropriate investment planning.
• Financial Situation:
  • Self-realization involves an honest evaluation of one’s current financial situation, including income, expenses, and debt. This awareness is essential for setting realistic investment goals and creating a budget for investment.
• Emotional Preparedness:
  • Investing can be emotional, especially during market fluctuations. Self-realization helps investors understand their emotional responses to financial decisions, enabling them to make more rational choices and avoid impulsive actions.
• Active vs. Passive Investing:
  • Some investors prefer a hands-on approach to managing their investments, while others may prefer a more passive strategy. Self-realization guides individuals toward the investment style that suits their preferences and lifestyle.
• Alignment with Values:
  • Understanding one’s values and principles is crucial for ethical or socially responsible investing. Investors who are self-aware can choose investments that align with their beliefs and values.
• Continuous Learning:
  • Self-realization encourages a mindset of continuous learning. Investors who are aware of their knowledge gaps are more likely to seek information, stay informed about market trends, and make informed investment decisions.
• Long-Term Discipline:
  • Awareness of one’s financial goals and risk tolerance contributes to long-term discipline. Investors who know themselves are more likely to stick to their investment plans even during market volatility, avoiding knee-jerk reactions.

According to a great Greek Philosopher Aristotle “Knowing yourself is the beginning of all wisdom”

In today’s story, let’s take a look at one of the most ignored aspects of investing; the need for knowing yourself before you start investing.

According to a great Greek Philosopher Aristotle “Knowing yourself is the beginning of all wisdom”

Well, investing is like marriage. Because both require a long term commitment.Now you must be wondering why this analogy between investing and marriage.

The reason is quite simple – when a person decides to get married, he/she looks for a person who matches their personality. So the entire quest for searching a life partner revolves around one’s one characteristic.

But sadly, the same approach is missing when it comes to investing. I see people asking more questions about the market, factors influencing the market and outlook of businesses. All questions are fine, no doubt. However, the starting point of investing should begin with knowing yourself.

So, which are the questions that you should ask yourself to understand yourself better?

 let’s break it down into simpler terms:

• What do I want to achieve with my money?
  • Think about what you want to do with your money, like buying a house, saving for your child’s education, or preparing for retirement.
• What is my risk tolerance?
  • Assess your comfort level with risk. Are you willing to take higher risks for potentially higher returns, or do you prefer more stable and conservative investments?The level of risk tolerance will also depend on factors like the number of earning members in the family. Along with this, your age, income, occupation, expenses expected in the future, etc. also should be considered. For example – if there is only one earning member in the family, the level of risk tolerance will be generally low, whereas if there are more earning members in the family, one can take more risks in their investment. Also, if you’re at the age of 30, earning modest and unmarried, you can take more risks as compared to an investor whose age is 60.
• What is my investment time horizon?
  • Determine the timeframe for achieving your financial goals. Different goals may have different time horizons, and this influences your investment strategy.
• What is my current financial situation?
  • Look at how much money you’re making, spending, and if you have any debts. This helps set the stage for your investment plan.
• What is my budget for investing?
  • Decide on a budget for investing. Think about how much you can invest without affecting your daily needs.
• Do I have some money saved up for emergencies?
  • Make sure you have some money saved for unexpected expenses before you start investing.
• How much do I want to be involved in managing my investments?
  • Consider if you want to actively manage your investments or if you’d rather have someone else do it for you.
• What is my knowledge about different investment options?
  • Gauge your understanding of various investment vehicles such as stocks, bonds, mutual funds, and real estate. Continuous learning is key to making informed decisions.
• Have I thought about how taxes might affect my investments?
  • Understand how taxes can impact your investments. It’s essential to know how much you’ll actually get back after taxes.
• How do I react when the stock market goes up or down?
  • Think about how you feel when the stock market goes through changes. This helps you understand your emotions and make better choices.
• Am I planning to invest for a short time or a long time?
  • Decide if you’re investing for something happening soon or for something in the future. Different goals need different plans.
• Do I care about investing in things that match my values?
  • Consider if it’s important for you to invest in things that align with what you believe in. This is called ethical or socially responsible investing.

Answering these questions in simpler terms can guide you toward making decisions that match your goals and how you feel about money.

Ultimately, self-realization contributes to financial success and satisfaction. When investors align their investment decisions with their values, goals, and risk tolerance, they are more likely to achieve the outcomes they desire.

In summary,

self-realization is the foundation for building a successful and personalized investment strategy. It ensures that investment decisions are aligned with individual preferences, goals, and values, leading to a more fulfilling and effective financial journey.

Disclaimers:
An investor education initiative By Findola Wealth Research Team.
This article is generated and published by Findola Wealth Research Team.
Investment in securities market are subject to market risks, read all the related documents carefully before investing.

This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.