Four Ps of Investing: Key to sound decision-making

Experts of marketing often talk about four P's of marketing which are product, price, place and promotion. Marketing decisions generally fall into these four controllable categories. What about investment decisions? Can there be a parallel drawn in investment decisions which will help make investments more controllable and productive? There is no doubt that investment decisions also have its own four Ps which is known to all of us but rarely followed. These four Ps are 1) Planning, 2) Patience,3) Performance and 4) Persistent. These four Ps are traits of investments which can help us achieve not just the financial goals but also make us get handsome returns from the market.

Let us look at the role of these four Ps in investments:

Planning: Without an iota of doubt, all investments need proper planning. Planning has various ingredients in it. It starts with setting of goals and continues till the time investment objectives are realized. This is to say that planning is not an adhoc decision but an ongoing process. In order to ensure that planning is successful, continuous monitoring is required which is meant to handle ongoing dynamics of market.

Patience: Patience always pays but nowhere has it paid as much as in investment. Though in the long run, we are all dead as per J.M. Keynes but for investments to prosper we need to have patience. Look at the stock market performance during last four years. Many investors would have lost patience because stock market has failed to perform but some investors have stayed by investing regularly in the market and are bound to reap benefits as market goes up. Some of the trends of upside movement are visible now.

Performance: Your investments should not only give returns but also perform well enough to meet your financial goals, Also as investors; we need to ensure that investments end up beating inflation. Inflation is a known enemy of investments and has got the natural ability to erode benefits of investments. It is important to ensure that performance is also measured against the risk of an investment. A risk free investment cannot give the same rate of return which an asset class like gold can give.

Persistent: In world of investments, never say die approach works. Look at systematic investment plans. Such approach works not only in mutual funds, but also in direct stock investments, investments in gold and other asset classes. We often become causal with investments and try to skip investments if the market conditions are not idle. Some of us also try to time the market. Timing market is indeed difficult and hence brings forward the need for been persistent in the market.

It is important to keep these four Ps in mind while making an investment decision which will create wealth for us and achieve our financial goals.