Managing Investment Risk by Yourself

Three things you need to do/have: Strong belief ; Learning from past experience and Understanding present information

Strong belief : “I am going to lose my money” or “I am going to gain from investment”? what is your belief when you invest in any investment instrument or investment product. If its of loss then there is no point of investing in that product. Reason is you will be always fearful and a slight negative can affect you emotionally and you end up taking wrong decision i.e. withdraw when not required.  When you invest, your mindset, your belief system, your conviction should be positive. No doubt, no fear, strong faith.

Learning from past experience: If there is lack of positive belief, conviction why it is so? Is it because of past experience or is it because of what others are saying? Please remember what others are saying could be their own experience which might or might not be relevant in your case. You have to analyse your experience only from your perspective, your action/inaction that led to this experience. Lets say you had a bad experience of illiquidity or loss . Why it happened ? was it because of wrong choice of product or was it because of wrong economic /market condition when you withdrew or was it because you withdrew out of fear as everyone was doing due to some negative factors at that time . You have all those records with you . See how much you got that time and what is the value today . Check what if you had not withdrawn at that time? . would you have lost or gained ? On most occasion one has seen it has been judgmental error. So by now you should know what caution and precaution you need to taken moving forward . One or few bad experience should never be generalised . One need to understand the cause of it .

Understanding present information correctly: Now you don’t need to repeat past mistake . Understand and interpret present information from credible reputed sources in terms of risk (losing) and return(gaining) . You know both psychological and information gap you had which led to past losses . Once you know present information , you need to take a call what will be your reactions . We never remain in same mindset always . It changes with changing scenario . So better you note down somewhere if X ( Worst happen in next 3 month , 6 month ,1 years what will be my reaction ) . This has to be written with all fairness based on what you actually believe you will do . Go through it few times on different day when in different mood to ascertain there is consistency in your belief system.  If you feel you might repeat same mistake as past better avoid such product and invest in safer ones . If you know now with learning you can withstand notional loss, volatility for short term and not panic then no issues you are on right track .

Another point on information interpretation is never believe blindly even if told by a great expert . Understand the notional risk part and its impact on you emotionally , psychologically and even physically ( health wise). Many times we have seen in past many future predictions of experts have gone wrong as no one is God here . Your loss is your loss , your mental distress is your distress and so only you have to safeguard against it .  

Remember the famous proverb at Railways Stations “Passengers please take care of your own luggage”. Same way in investment  “ Investors please take care of your own money “ . So please follow the three stated principles to safeguard your investment interest.