Investment Tips Warren Buffet once described the futures market, ie Future and Options (futures market), as a weapon of financial mass destruction. These financial instruments were introduced with the goal of hedging equity investments.
Risk and volatility in the market are two different things. Volatility can also be assessed from mathematical formulas, but risk is subjective. Every person has a different definition of risk and ability to take it, which has no formula. The volatility of one asset remains the same for every investor, but different investors assess the risk of the same asset differently. The stock market collapsed like cards during March 2020, but during the next nine months, the market has made tremendous recovery, setting new records continuously. Such volatility is afforded to investors who have the ability to take both financial and emotional risks. Therefore, investors should invest in a specified asset class only when they are able to withstand the volatility associated with that category.
There is a lot of danger in the futures market
Warren Buffet once described the futures market, ie Future and Options (futures market), as a weapon of financial mass destruction. These financial instruments were introduced with the goal of hedging from equity investment, but many investors play short-term big bets on them as this segment can earn more in less time. The role of these financial instruments was very important during the economic crisis of 2008. Therefore, ordinary investors should stay away from such ‘financial weapons’.
Reduce financial debt
Every person should avoid non-urgent debt, which works instead of reducing the difficulties. Your home loan, education loan or car loan should not exceed 10-20% of your total income. It should be kept as low as possible. It is best to know your ability to repay your loan before taking a loan. Expensive and non-legitimate loans can not only spoil your financial health, but can also ruin your assets. Their mental stress will also be very high. Pay your personal loan or credit card loan as soon as possible and stay away from them as much as possible. Both are very bad for your financial health.
Find opportunities in disaster
We often hear that disaster comes with opportunities. Today’s crisis made it clear that business can be done in a very different way. For this, those techniques can also be used, which we already have, but we were either avoiding them or shying away from their use. This crisis has not only changed our working environment, but has also given open skies to many emerging sectors like HealthTech or EducTech to take flight. In order to find opportunities in difficult times, you need to keep your eyes and ears open and it is very important to change your thinking. In times of crisis it is very important to know what can be done in the changing environment and how it can be combined with our abilities. This crisis has given us new dimensions of thinking.
Patience is bitter, but its fruit is sweet
Elders said that bad times will also pass. In today’s time, it is important that people keep themselves safe from the fake news and rumors that dominate the social media. In March, when the market fell flat due to the epidemic, a large number of investors pulled out of the market after clearing their investment. But with the help of patience, we told that the investors who gave time and continued the investment patiently, they are the biggest beneficiaries today. The market is continuously creating new peaks. There is no need to panic in investment, but investors should act with caution and restraint. Humans have faced crises every century. We have overcome all challenges due to our concerted efforts. Sometimes you can earn by not doing anything. Eventually, the Covid-19 crisis will also end.
(The views published are personal to the author.)