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How to make an investment decision?

Updated: 5 days ago


As a financial planner, I ask my clients, why are you investing in the stock market?

They will say returns. The stock market gives the best returns.


How much of the returns you will get?

This question will labor on for an hour or two and finally, they will agree that their intuition says that if something is going up and something is going down if we jump the boat at the right point, I will get great returns. I will say that is good. Your intuition is right, after all, everyone can see the ups and downs, in hindsight. Do you know which will go up and which one will go down in the next 6 months or in a year? Do you have any data to believe that it would work? After a few hours of discussion, we will conclude that the data is not conclusive. Then I will say what you are trying to do is called timing. No one ever timed the markets and became rich. In other words, no one became rich in hindsight. I will allow the reality to sync in.


Then after some time they will counter me and ask there are so many traders, fund managers, successful investors. Yes, there are traders and fund managers. Do you think they are playing with their money? After some thought they will say no. Then I ask them do you know how much money they have, to manage their risk? At the end of the day no matter what happens, it is not their money and they will sleep well in the night.


But when you trade, you are trading from your savings account. If you don't know what yo