- Investment logic is really very easy to understand, everyone is looking to earn money from money. The most important underlying factor of investment is that we need money to invest. Investment empowers one to desire and fulfill the required needs and demand for themselves. People invest for reasons and goals, such as pension, luxury, marriage, home or car and many more similar requirements. There is a similar solution for all of the investing goals to achieve, logical and efficient investing.
- When we look at the successful investors, it seems very easy to invest and see the money get double or triple but investing is a very complicated and tiresome task and people generally get afraid of. There is no right or wrong investing, yet history has many debatable logic about it. Mr. Gartman suggests that one should be patient with winning investments and impatient with losing ones, Prince Talal says that one should stick and trust with the investments (although invest after full research), Mr. Bullish Man Carlos Slim applies the logic of forward thinking and looks for investment opportunities everywhere and the Most Successful Investor, Oracle of Omaha himself Mr. Warren Buffet sums it very uniquely yet very simply, understand the business, look for quality and stick for long term, appropriate returns will come.
- There is one thing common among successful investors, which is the knowledge and application of the same in logically deriving the formula of investment. Today’s markets are full of people who call themselves investors but have never done any logical investment. Logical investment is nothing but a goal based investment philosophy, where the achievement of predefined goal and target matter than vague philosophy of doubling or tripling returns from investments. Markets are full of various investment ideas yet people are not able to find such and invest without proper research, just to loose money and curse markets.
- Retail participants of the markets (Traders and Investors) look for investment ideas, generally following the tips and advice from some stock analyst or broking houses’ suggestions shown to all, yet end up loosing money of from investment. Why is that, how can it be possible if the opportunity was well researched, what about the credibility of such tips and research calls? Anyone who has spent a few months in the markets can out-rightly call such analysts fake and selfish yet can’t ignore or un-follow them. Winner investors are the one who believe in and understand the business where they invest. Mr. Gartman have very bluntly said, let’s be correct for mere 30% times while investing, gains will be huge to cover the losses. Losses are inevitable in the stock markets, yet investing always fulfills the desired goal if done logically and efficiently.
Well, the solution is very simple. It’s the KNOWLEDGE. One should efficiently learn it, think over it and logically apply it.
- Investment is expected to provide high Capital Appreciation (Price Returns), a Regular Dividend and more than bank Interest Earning. Investment options carry risks, some investment options such as Equity and Real Estate etc. carry higher risk where some such as bonds, Bank’s Deposits carry lower risks. A logic of risk-return philosophy is: “ For higher returns one will have to invest in higher risk investment options”. Higher risk investment options provide a volatile but higher returns whereas bank’s deposits and bonds provide stable yet low returns in comparisons.
- Goal based investing has the basic concept of investment horizon, which is classified as Long Term or Short Term.
- Investment Horizon: When the goals are to achieved in the short period of time, or numerically 1-3 years forward looking goals can be classified as short term investment horizon goals. The investment has be worth of desired value in the short span of time so that the desired goal can be achieved. Long term investment horizon is generally for high demanding goals such as pension and home. Usually more than 5-years time period for investment can be categorized as long term investment horizon with a specific goal in mind. It required efficient investing, regular tracking of investment, trust in the business and capacity to stick for a long period of time to that investment option.
- The bifurcation of different investment options on the basis of the investor’s time horizon done by many analysts seems of no value to me as linkage of investment horizon with investment options is incorrect. Returns are bound to be generated if money in invested. If someone is investing for a shorter period of time to fulfill a goal, then any investment option with such attributes to provide the desired return has the capacity to fulfill the expectation to generate the desired returns and its opposite is also true.