Give Your Financial Future A ‘Professional Touch
Hemant Rustagi
Chief Executive Officer, Wiseinvest Advisors
It is heartening to see equities gradually finding its rightful place in the investment universe of Indian investors. However, considering the importance of this asset class in the wealth-building process of long-term investors, it is important to choose the right medium for investing in it. For example, mutual funds can be a better option than investing directly into the stock market.
Besides, the key is to follow an investment strategy that propagates a disciplined approach and monitor the progress of the portfolio during one’s defined time horizon. This entire process can be quite overwhelming if one is not well-versed with the nuances of investing in the stock market.
Moreover, considering that volatility is a natural phenomenon in the stock market, one must have the patience to wait out the turbulent times. If you are one of those investors who are in the process of adding this wonderful asset class in your portfolio, you must learn to avoid doing things that may expose you to higher risk and derail your investment process. No doubt, if you have the capability to select the right stocks as well as analyse the impact of various events on the companies in your portfolio, investing directly into the stock market can give you higher returns as compared to a diversified vehicle like mutual fund.
However, if the stock selection is not good, you would expose yourself to much higher risk when the stock market turns weak. Therefore, to begin with, it makes sense to entrust the job of managing your money to professional fund managers who not only have access to research but also have the capability to make rational decisions. Besides, investing in a mutual fund rather than directly in stocks has many other advantages. Apart from being an easy method of investing, it is much easier to track performance as one has to track only one price i.e. NAV instead of several stock prices.
Mutual funds offer a wide variety of equity funds ranging from diversified to specialty funds, enabling investors with different risk profiles to choose the right ones and achieve their investment objectives. Even for aggressive and knowledgeable investors, there are plenty of options. For example, a sector fund can not only be a perfect substitute for buying a few stocks from a sector that one likes but also takes some of the risk out of owning a particular stock. However, investing in mutual fund too can be a little tricky as there are a number of funds to choose from in each of the categories.
Besides, there are a few other aspects that every equity fund investor must know. Firstly, it is important to understand that different segments of the market perform differently at different times. As the tide shifts in favour of a particular segment, the performance of funds focusing on that segment improves dramatically. Secondly, one must hold a fund long enough to evaluate its performance i.e. at least one year or so. Many of us make the mistake of either holding on to funds for too long or exit in a hurry. In other words, if one takes a wrong decision, there is always a risk of missing out on good rallies in the market or getting out too early, thus missing out on potential gains.
Considering the number of aspects that one needs to focus on even while investing in mutual funds, it is always advisable to take the help of a professional advisor who will not only assist you in choosing the right funds and in the right proportion but also try to keep emotions put of your investment process. Despite following a disciplined investment approach, one requires hand-holding during turbulent times to avoid making haphazard investment decisions. As is evident, a combination of allowing professional fund managers to manage your money and seeking guidance from a professional advisor while doing so can do wonders to your financial future.