Today we are all living in an information age. But how much of the information is really useful?
There is no right answer to this and it depends on how one uses the information. One must
be able to connect the dots on the information available and apply this to his benefit.

Similarly, it is not the wealthy who always compound his returns, but one who does not blindly follow the herd and take decisions based on data and proper analysis. In two months of this year — February and March — the Sensex fell by over 11% and individual stocks fell much more. Even returns from mutual funds dropped during those two months.

But as an investor, what did you do? Ideally, you could have used historical data for your benefit. As an investor, we ask more questions on returns. We rarely talk about the framework of the investing. In fixed instrument products, we are happy with the guaranteed returns. Each asset class behaves differently and we should not mix the framework of the process and compare the returns.

We talk about risk from the returns perspective. However, it is important that one knows one’s risk capacity and risk tolerance. One is the ability to take risk and the other is the willingness to take risk. Both work hand-in-hand. If you have the ability to take risk, but not the willingness to take it, volatility in prices will effect your investment behaviour, which can affect your investment process.

To ensure that you do not react or act in a knee-jerk manner, one must have a well thought out plan of action. One must develop the ability to filter useful information with the trivial. The information overload needs to be processed and then acted upon. This is not an impossible task, but definitely a difficult one.
Besides the market, its your behaviour towards the investing process that will be the factor deciding how much you accumulate. If you can follow the process taking into account your investing behaviour, then you will savour the investing journey, irrespective of the volatility.

The writer is founder and managing partner, BellWether Advisors LLP