The Right Way to Invest: Keep it Simple, Stay Patient and Be Disciplined

I learned this the hard way early on. Back in the 90s, I got drawn into the stock markets. I bought shares based on tips, hoping to make quick bucks. But I ended up losing all my money fast. It was a tough lesson that real wealth creation needs patience. It's like growing mangoes - you can't pluck the fruit without waiting many years for the tree to mature.

So what's the right approach? It starts with developing the habit of regular, sustained investing over long periods of time. Don't wait to invest whatever is left after expenses. Deduct your investment amount from income first, then live off the remaining money. Even a small amount invested monthly through an SIP (Systematic Investment Plan) in mutual funds builds a huge corpus over decades through rupee cost averaging.

With SIPs, you don't need to worry about market timing and entry levels. You keep investing at all market highs and lows automatically. So the costs average out in the long run. It's like the saying - "Little drops of water make a mighty ocean."

But investing regularly is just the first step. You need patience to hold your investments for years, even decades to reap the full benefits of compounding. Quick bucks through speculative bets rarely create real wealth that lasts. The right approach is a disciplined, long-term outlook towards investing.

Diversification across multiple asset classes like equity, debt, gold, real estate etc. is crucial to manage risk. Different assets perform differently across market cycles. By spreading your money, you reduce the risk of a single-point failure eroding your portfolio when one asset class underperforms. Don't put all eggs in one basket.

Stock markets will inevitably be volatile with ups and downs. The right approach is to remain calm and rational during rough periods, instead of panicking and exiting at the wrong time. Like an expert sailor, keep your eyes focused on the final destination. Short-term storms shouldn't divert you.

You don't need to be an investment guru, but some basic financial understanding helps a lot. Learn concepts like asset allocation, inflation, risk-reward profiles etc. An informed investor can make better decisions suited for their goals. When you're sick, you visit a doctor and then get medicine from a chemist. Similarly, for investing, consult a good advisor with your savings details and goals, then invest based on their advice.

There's no one-size-fits-all portfolio for everyone. The right approach is to customize your investment strategy based on your income, goals, risk appetite and investment timeframe. A young earner can take higher risk for higher returns, but someone nearing retirement needs a stable portfolio.

We are fortunate to be living in times of India's economic growth story cutting across sectors like financial services, IT, pharmaceuticals, consumer goods, infrastructure and manufacturing. Smart portfolios aligned to such sectors can benefit tremendously from this growth. Mutual funds provide an easy option to participate in this growth across multiple segments. 

But stay prepared for real tests of patience and discipline during tough periods. People often think investing is simple and SIP returns are steady. But the "Agni Pariksha" or real test for SIP investors was in March 2020. Returns were negative for three years, low for 5-7 years, and moderate for 7-10 years. Only those who stayed invested are seeing double-digit returns now.

The journey to financial freedom has its share of temptations that can lure you away. But don't get distracted. Keep learning, avoid greed or fear, and tell yourself - investing is a marathon, not a sprint.  

With discipline and the right approach, you too can build an enviable portfolio and achieve financial freedom to live life per your desires. The road may be tough, but the rewards for those who persist are immense. Start today, your future self will thank you.