Stay Focused, Choose Wisely

Hemant Rustagi
Chief Executive Officer, Wiseinvest Pvt Ltd.

A disciplined approach to investing plays an important role in creating wealth for both, experienced and new investors. A major difference in the approach here, as compared to the past, has been goal-based investment strategy followed by investors. The combination of a disciplined investment approach and remaining committed to the defined time horizon not only helps you avoid making haphazard decisions when faced with volatility but also allows you to benefit from the true potential of an asset class like equity.

The positive impact of the change in the attitude of investors is evident from the fact that despite the pandemic causing volatility and uncertainty in the market, the impact on SIP inflows hasn’t been quite significant. In the past, the haphazard approach of investing without a clearly defined time horizon and goals compelled investors to stop SIP every time the stock market faced volatility. Investors have now realised that although an asset class like equity tests their patience and perseverance, they reap the benefits of ‘averaging’ by remaining committed to their defined time horizon and focused on investment goals.

Investment advisors have played an important role in this paradigm shift by handholding investors and guiding them through the challenging times. Many a times, this is not really appreciated as the impact of advice during rough times can’t be quantified in terms of short-term gains in the portfolio. In fact, as soon as the market settles down, the value of such advice is forgotten. In reality, constant advice and interaction with an advisor helps you keep your portfolio on track at all times. Considering that equity has an important role to play in your long-term wealth-building process, seeking professional advice can make a significant difference to your portfolio, especially if you are not confident about taking the right decisions yourself.

Although investing in a regular plan of a mutual fund is more expansive as compared to a direct plan, the benefits of keeping the asset allocation intact far outweigh the increased cost in the long run. Besides, working with an advisor ensures that your portfolio is monitored in a disciplined manner and you get to Hemant RustagiChief Executive Officer, Wiseinvest Pvt Ltd. Stay Focused, Choose Wisely DS participate in this process which prompts you to ask relevant questions in the future. Then, there are investors who often face the dilemma of whether to invest directly in stocks or take the mutual fund route.

The combination of a disciplined investment approach and remaining committed to the defined time horizon not only helps you avoid making haphazard decisions when faced with volatility but also allows you to benefit from the true potential of an asset class like equity.

While investing directly in stocks can be more profitable as compared to a diversified vehicle like mutual funds, investing in them itself can be quite tricky as considerable research has to be carried out regarding the performance of the economy, industries and the companies. For someone who is not familiar with the process, it can be quite overwhelming to do so. Therefore, to begin with, it makes sense to entrust the job of managing your money to a professional fund manager who not only has access to research but also has the capability to take 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 – the 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.