Stay Focused on Your Goals

Stay Focused on Your Goals

Hemant Rustagi
Chief Executive Officer, Wiseinvest Pvt Ltd.

With the Indian stock market touching dizzying heights, investors are experiencing mixed emotions of awe and fear. While those who stayed away from the market have been watching it rise to an all-time high in amazement, existing investors are faced with the fear of losing some of the gains they have made. The situation is even tricky for those who pared exposure to equities over the last one year or so, hoping for a correction and reinvesting at lower levels. Then, there are fence-sitters who are wondering whether they should begin investing in the markets at the current levels or not.

Although the prospects of the stock market look promising from the long-term point of view, it is important for investors not to get carried away by the euphoria that exists today. The right way for a common investor would be to follow a goal-based strategy rather than investing with the sole objective of making some quick money. A goal-based investment strategy requires you to entail an asset allocation model. Simply put, it ensures that only that part of your portfolio that is earmarked towards long-term goals is invested in equities. Besides, it encourages you to invest with a defined time horizon which helps in honouring your time commitment.

In other words, you will find it easier to not only remain invested during volatile times but also continue your investment process and benefit from ‘averaging’. Of course, you must choose the right investment vehicle to invest in an asset class like equity. If you do not have the wherewithal to invest directly into stocks, mutual funds can be an ideal choice. Mutual funds are diversified by nature and offer a variety of equity funds to investors. In fact, mutual funds allow both new as well as experienced investors to design a portfolio in line with their risk profile.

If you are one of those investors who are looking to start investing in equity funds but are not sure about how to begin, don’t hesitate to take the help of a professional advisor.

"One common mistake made by investors during the selection process is to rely on the short-term performance of the funds"

However, even if you decide to have an advisor, you must participate actively in the decision-making process. This will make you a better informed and more confident investor over time. It is also important for you to understand the selection process. The funds should be selected after careful deliberations especially keeping your risk profile, time horizon and investment objectives in mind.

You will come across funds that may appear very promising and exciting. However, you need to learn to say ‘No’ to funds that you don’t really want or need. One common mistake made by investors during the selection process is to rely on the short-term performance of the funds. While reviewing a fund’s performance, you need to not only look at performance relative to funds with similar objectives over a period of at least 3-5 years but also the risk taken by the fund manager to deliver those returns. Besides, you must know what to expect in terms of returns and how to measure the performance.

While all of us hope that funds we are invested in do well consistently, in reality there are certain time periods when the fund’s performance may slip. While you need not panic every time the market turns volatile, it helps if you are prepared to deal with such a situation. Last but not the least, if you are a long-term investor, you must be prepared to face volatility from time to time. Remember, fluctuations allow serious and disciplined investors to benefit from opportunities that a casual investor usually misses out on.

 

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