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Digital World & Investments - A disaster waiting to happen?

digital-investing


Early 80's Investor

You bought a quality stock & kept these in the form of share certificates, clearly mentioning your name & purchase details. Many serious investors used to store these certificates in bank lockers, considering them as their assets. 


If you want to sell these assets - you had to wait for next day's newspaper to check out the stock prices (Remember, only few had Television sets back then & no business channels). The next challenge was to wait for the banks to open for collection of certificates & then reach out to the stock broker for making this transaction. Quite Tough? Right!!


An Investor in 2018

Someone suggests you to buy stocks, but then you realize you don't have a trading and demat account. No problem sir! We're living in a digital age. There are hundreds of broker websites, which provide instant registration & verification. Aadhar based OTP has made our lives even more simpler. Isn't it?

Buying stocks is as simple as it can get. Open your trading account, add funds through your linked bank account & place a BUY transaction. Now every new stock purchased is just one additional row in your holding statement. 


The Difference - How digital age impacts our investment decisions?

If you were to sell in 80's or 90's, it had to be a very informed decision. You as an investor had to be completely convinced that you would want to sell the stock & then make efforts for the transaction. The chances of panic selling was way too low. Does that mean, stock markets have never crashed before? No, markets crash because of traders & markets recover because of traders. Traders have always been active on the exchanges irrespective of the effort they had to put in. Investors who survive bear & bull markets emerge as real winners.

In this digital world, all information is available on just one click of your smartphone. Your entire portfolio is available & open for transaction on your device. In today's generation, if you consider yourself as an investor, you need to behave like one. What would be your reaction if suddenly you hear the news of India's another surgical strike on Pakistan? Stock market will surely panic & so would you. The chances of making a stupid decision in just a click is way too high. Your entire effort while making investment decision is doomed. In just a second, you have converted yourself from an investor to a trader.




If there was a similar scenario in 80's, you would have had ample time to think & re-think. Even if you were convinced you're going to sell, we Indian's are lazy enough to make such efforts!! Read on - Greed & Fear - The emotions that drive equity markets


Impact on Mutual Fund Investments?

Many retail investors who do not have information or time to invest in equity markets, take mutual fund route. All thanks to SEBI (Securities & Exchange board of India) & AMFI (Association of Mutual Funds in India), investing into mutual funds is as easy as buying a product on Amazon.

It is even more easy to track the investments. There are 100's of app's which allow you to make direct investments which enables you to save on broker's commission. You can read here for the best available options to choose from - Best Online Platforms for Direct Mutual Fund Investments in India.

The best part is you can track your investments daily. Yes, daily! The mutual fund's NAV is usually updated around 9-10 PM & these apps enable you to track the current value & performance of your portfolio. Most of the investors know Mutual funds are a long term wealth creation instrument, then why do you need to track daily? No, I'm not questioning the feature or availability of information - but as an investor it can again enable you to take decisions which are against investment principles. Mutual Fund Investments are subject to market risk & to mitigate the risk, you need to spend enough time in the market. Read on - From Complicated to Committed - My relationship with Investment

In this internet generation, all information is available in single click. It is up to an investor to use this excess information to make an informed decision or make a panic decision. I'm sure you would have heard the phrase - Excess of everything is bad!




And forgive me for calling this era as an internet generation. No, I'm not 50+ or for that matter not even 30+ and hence, these thoughts are not out of generation gap. The only basic principle of long term wealth creation is Hold Right, Sit Tight!! Those who follow the principle & use digital information to their benefit are bound to win. Those who let digital world play with their emotion, need to learn the art of patience!!

Please share your thoughts on the article in the comments sections below!!



1 comment:

  1. Me 2 sometimes think when NAV's are fast growing, what if I sell the units & get some money?
    So it's obviously true investors become traders within minutes coz of the digital updates.
    Good article..

    ReplyDelete

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