As an investor one should be aware that there are many things which should be kept in mind before taking a plunge into the complex world of investments. Many things work and many don’t, here are few things the markets does not care about.

“Your cost basis on an investment.” The market doesn’t care what you paid for a stock or at what price you have entered. You can wait forever to get the break- even price but there is no guarantee that you’ll recoup your losses if you have paid the wrong price.

Lesson: Don’t be afraid to book losses if you have bought a wrong stock at a wrong price.

“The returns you plan to achieve your financial goals.” Everyone expects high returns on their investments and sets their goals based on the returns but markets have no emotions and no goals. The stock market isn’t always a convenient place that gives you exactly what you need and when you need it.

Lesson: Be ready for the deviation from your financial objectives and embrace it with grace. One should always have a Plan-B in place before diving into the world of investments.

“When to enter and exit.” In a perfect world, everyone would like to put money to work at the depths of a bear market and exit during a raging bull market. Unfortunately, the markets doesn’t care about your investing lifecycle or exit plans. Before you start investing you should be well aware that everyday is good and equally bad to enter into the market.

Lesson: Invest into the market gradually and for the long term.

“Feelings.” Emotions usually gets in the way of investment success but the markets offer no empathy no sympathy if you get too excited, nervous, scared or greedy about your holdings. Attaching feelings to your investments is a wrong way to make sound investment decisions where money is at stake.

Lesson: Know your risk appetite and invest only that much for which you have the stomach to bear losses.

“The degree of difficulty.” Making your strategy more complex does not automatically lead to better returns. There are no bonus points awarded for the degree of difficulty or level of sophistication.

Lesson: Markets doesn’t understand how complex instruments or strategies are? They might be good for the makers and may not necessarily benefit end users.

“Investment Quotes.” Market theories and practical are two different points in the world of investments. Quotes of successful people aren’t going to help you the next time we see a bear market.

Lesson: Don’t get excited with the quotes you read and make investments based on it. Remember every individual is different and has different degree of risk appetite. 

“Effort you put into your investments.” Trying harder doesn’t always lead to more success in the markets. Markets has no means to weigh the efforts put in by the person and can show completely opposite results for two different individuals with the same degree of efforts.

Lesson: Hard work is important and required parameter to get going into the world of investment however, success is not necessarily attached with it.

“How successful you are.” Success in other areas of life doesn’t always translate into success in the markets. Personalizing your successes in other spheres of life with the markets can be disastrous if you become too overconfident in your own abilities.

Lesson: Markets know nothing about the success and failures of an individual and are aloof from the emotions attached to it.

“Arithmetic vs. logarithmic charts.” The markets don’t care how good you are reading the charts and making them look good in an Excel graph. You may read umpteen charts and make an investment decision based on it but it’s not going to guarantee you make more money.

Lesson: Knowing the technicalities about the investments is good but the market doesn’t offer any guarantees to it.  

“Money you made on your last trade.” Investors have a memory but the markets don’t. One winning trade or success in the past has no bearing on your future trades or success.

Lesson: Your successful past offers no guarantee of you making money in the present.

“Your experience in the markets.” Just because you’ve lived through a bear market or rising rate environment or raging bull market does not make you a better investor. Experience can help but also be a crutch when you don’t understand that every cycle and market environment is different.

Lesson: Experience matters but markets doesn’t keep record of it. Your investment decision should be based on multiple set of parameters and experience is just one of them.

“Whether you’re right or wrong.” Being right is a magical feeling but the only thing that matters in long-term is making a good or bad decision. People should worry less about being right and focus more on not making a wrong decision.

Lesson: Decisions taken in the markets can go either way, objective is to make money and not prove your decision taking abilities.