Core Investment Lessons which investors should not ignore.
Need / Goal based financial planning: Investment into various investment products just for the appreciation/return given by the product or expected is not the right way to look at investing. Investors should always make a financial plan before they invest based on their needs and goals. They should understand their need, goal, risk appetite, time horizon and product details and then invest. This can only be achieved by proper financial planning.
Asset allocation: Asset allocation is the key and investors should never ignore the basic principles of it. They should always be properly invested in various asset classes depending on their risk profile and time horizon.
Proper Review and rebalance: Investors should keep a time table, ideally once in every quarter, to review the portfolio of various asset classes where they had invested. When the needs, risk profile and goal’s change due to various reasons then is the time we should go back to the portfolio made and do a proper review and rebalance.
Timing the market via MF is foolishness: MF’s work on the concept of Net Asset Value which changes daily. There is no point in observing the market till 2 in the afternoon and then taking a call to buy or sell the MF. MF’s should be considered as a means to reach the aim/goal and should be invested with a timeframe in mind or rather I would say with proper financial planning.
Regular investment is the key in a volatile market: Regular investments via Systematic Investment plans also called SIP via the mutual fund route add that extra stability to your portfolio. It’s a tool which averages out the cost of the portfolio and should be a part of the MF investment portfolio.
Direct Equity should also be an asset class in the portfolio: Lot of investors keep a view that trading in stocks doesn’t make sense to them as it requires time to buy and sell. The best portfolio as per me should also contain direct equity stocks apart from MF’s. There is absolutely no need for the investors to buy and sell. They can buy some fundamentally good stocks and should adopt a buy and hold strategy for the long term.
Avoid complexity: Investors should understand the way their money will be invested by the fund manager. Basically he should clearly understand the concept of the fund and go through the key information memorandum of the fund. As there is a saying that risk comes from not knowing where you are investing. So avoid unnecessary risk and complexity.
Be conservative in expectations: Markets are evolving day by day and the risk return graph keeps on changing so it better to be conservative and practical in the expectation of the portfolio returns.
Asset allocation: Asset allocation is the key and investors should never ignore the basic principles of it. They should always be properly invested in various asset classes depending on their risk profile and time horizon.
Proper Review and rebalance: Investors should keep a time table, ideally once in every quarter, to review the portfolio of various asset classes where they had invested. When the needs, risk profile and goal’s change due to various reasons then is the time we should go back to the portfolio made and do a proper review and rebalance.
Timing the market via MF is foolishness: MF’s work on the concept of Net Asset Value which changes daily. There is no point in observing the market till 2 in the afternoon and then taking a call to buy or sell the MF. MF’s should be considered as a means to reach the aim/goal and should be invested with a timeframe in mind or rather I would say with proper financial planning.
Regular investment is the key in a volatile market: Regular investments via Systematic Investment plans also called SIP via the mutual fund route add that extra stability to your portfolio. It’s a tool which averages out the cost of the portfolio and should be a part of the MF investment portfolio.
Direct Equity should also be an asset class in the portfolio: Lot of investors keep a view that trading in stocks doesn’t make sense to them as it requires time to buy and sell. The best portfolio as per me should also contain direct equity stocks apart from MF’s. There is absolutely no need for the investors to buy and sell. They can buy some fundamentally good stocks and should adopt a buy and hold strategy for the long term.
Avoid complexity: Investors should understand the way their money will be invested by the fund manager. Basically he should clearly understand the concept of the fund and go through the key information memorandum of the fund. As there is a saying that risk comes from not knowing where you are investing. So avoid unnecessary risk and complexity.
Be conservative in expectations: Markets are evolving day by day and the risk return graph keeps on changing so it better to be conservative and practical in the expectation of the portfolio returns.
Never be sentimental: Lot of channels and news papers will come up with their own theory of the happenings in the market. Investors should either stick to the goals and plans made or make their own research on the happenings in the market and analyze the impact. One should never sell without understanding whats actually happening in the market. It migh be an opportunity loss too.
Choose a solid Advisor: Last but not the least is to choose a solid advisor. I always recommend choosing an advisor who is independent, knowledgeable and knows what he is speaking about and preferably is not running for money or targets. You will understand this when you speak to some advisors. Always remember that your advisor can make or break your dreams so choose wisely.
Lets Invest..
Choose a solid Advisor: Last but not the least is to choose a solid advisor. I always recommend choosing an advisor who is independent, knowledgeable and knows what he is speaking about and preferably is not running for money or targets. You will understand this when you speak to some advisors. Always remember that your advisor can make or break your dreams so choose wisely.
Lets Invest..
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