Success Lies in Simplicity

Buying and selling funds can be exciting especially if you buy low and sell high. Nonetheless, doing it often may be risky if you are investing for your retirement and your future is involved. Therefore, it is better to stick to the age-old ‘buy and hold’ strategy. It is a slow but steady route to growing your wealth and probably the best investment strategy. Many renowned investors, both domestically and internationally, such as Benjamin Graham and Warren Buffett are firm believers of the buy and hold type of investing. The best part of this strategy is its simplicity and low maintenance.

You require to invest very little skill and intelligence after you have selected the right funds. All you have to do is to keep monitoring and rebalancing them as and when required. Selecting the right fund becomes a pivotal decision. Our cover story this time will help you in taking this important investment decision. It takes a different route of finding the funds you should buy and hold. It delves deep into it and tries to understand the ‘factors’ that have performed better in the long run.

Factors are persistent drivers of returns across asset classes. As an investor, you can use these factors to better capture their potential for excess return. Your funds should be such that they have these factors. A couple of examples of factors are size and value, which means that in the long run assets with lower market-cap outperform the market. Similarly, value outperforms growth.

You can diversify your investment to capture different factors that minimise your chances of losses and maximise chances of success. Elsewhere in this issue we have also covered the mutual fund options that you have in the wake of the lowering of interest rates in most of the government saving schemes. The fall in interest rate has made many investment avenues unattractive. Hope this issue will help you to make a profitable investment decision. We will be happy to receive your feedback and suggestions.

SHASHIKANT