The Art Of Investment Management
Hemant Rustagi
Chief Executive Officer, Wiseinvest Pvt Ltd.
Investors often face a dilemma of whether to invest on their own or take help of an investment adviser. On the one hand, there are investors who believe that investing in mutual funds is as simple as picking a few off-the-shelf and keep investing in them over time. On the other hand, there are those who find the entire process of investing cumbersome and hence need the help of an adviser. In reality, there are pros and cons of both these approaches. While mutual funds are a simple investment vehicle, investing in them is not that simple. Therefore, it pays to have an adviser who can handhold you through your investment process.
However, having an adviser doesn’t mean that you completely withdraw from it and let him take all decisions. Investing is an on-going process. It begins when you initiate your investment process and ends when you achieve your investment goals. Considering that all of us have a number of investment goals to be achieved over varied time horizons, this process continues through our entire lifetime. That’s why investment must be considered as an on-going process rather than a one-time activity.
Moreover, a disciplined approach of investing systematically through your defined time horizon makes it easier for you to save on a regular basis as well as tackle the volatility in the market. Another thing that can make you a successful investor is having clarity on your focus areas. This goes a long way in deciding the suitability of different investment options and the proportion of exposure to each one of them. Remember, the focus area should change depending upon the different stages of your life.
During the accumulation stage, capital growth should be the priority and income generation with capital growth should take precedence during the disbursal stage. Hence, active participation is required through your defined time horizon in every aspect even if you take help of an adviser. Some of the important aspects here are asset allocation, monitoring performance and changes in the portfolios of funds, analysing impact of domestic and global economic and geo-political issues on funds in the portfolio and make changes if required. Similarly, the parameters defined at the start of your investment process create a roadmap for achieving your investment goals.
Remember, no one can do a better job than you in providing clarity here. It is also important to understand why and how investment decisions are taken, what is the selection process and how different events impact the portfolio and how is your advisor’s interest aligned to your portfolio. Remember, most investment decisions require common sense and hence the learning process for you shouldn’t be intimidating. Getting involved in the decision making not only makes you a better investor over time but also keeps your advisor on his toes.
It is also critical to keep increasing investment amount over time and avoid making haphazard investment decisions when faced with adverse market conditions. In the absence of any hand-holding for investors managing their own investments, keeping emotions out of their investment process and ensuring that every aspect is taken care of becomes quite challenging. Besides, it is important to keep looking for new investment opportunities and analyse their suitability. Inability to do so can result in missing out on potential gains. Moreover, do-it-yourself (DIY) investors have to manage all service-related activities on their own. In case of any dispute regarding their investment, redemption, and non-financial transaction, the follow up has to be done on their own. Although it may not be difficult to get redressals, it can be a time-consuming affair.