According to the American motivational speaker Steve Rizzo, “If you let fear of the unknown stop you from taking chances, you will stifle your true potential” – a befitting remark for the volatile investment market. It may deter many from taking the plunge. The fear of market unpredictability and losing money may act as deterrents. But, would you let go of the opportunity the market has to offer because of this? A little hand-holding may help.
How you can take better investment decisions:
1. The early bird advantage
When you start investing early, youmight earn more Investing in mutual funds via SIP may help reap the benefit of the power of compounding. Investing early provides extra portfolio momentum. For instance, let us say that 28-year-old Riya and 32-year-old Ranjeeta start investing ₹10,000 monthly at 12% per annum. When they’re 40, Riya accumulates ₹32,22,522, and Ranjeeta gets ₹16,15,266. As it is abundantly clear, Riya earns ₹16,07,256 more just by investing four years early.
2. Playing the long game
When you stay invested for longer, you earn more, thanks to compounding. For instance, if Riya starts investing ₹5000/month at 30 and remains invested till 60, then assuming a hypothetical return of 10%, she earns approximately one crore in 30 years. It reduces the overall investment volatility and increases the chances of consistent returns.
3. Diversification edge
It is possible to earn a maximum investment benefit if you put your money in different products/asset classes/sectors instead of parking it in one product. This way, you mitigate risk. If one of your investment products runs loss, you have other products to rely on.
4. Doing groundwork right
Thorough research helps kick start the investment journey. Get your facts clear and get rewarded better. Comparison is a great way to get acquainted with the market scenario.
5. Evaluating risk-appetite
It depends on various factors like age, financial status, willingness to take risks, goals, etc. Matching your risk appetite with those associated with your chosen investment products is essential.
6. Rome wasn’t built in a day
Patience is key to successful investment. Suppose one of the funds you invested in dropped by a fewper cent in the third quarter but picked up in the fourth. If you had given up on it the moment you lost money, you wouldn’t have witnessed the profit earned thereafter.
7. Learning from mistakes
Don’t fret when you lose money due to misjudgement. Instead, analyse the mistake and try not to repeat the same. It is always better to consult online and offline references.
8. Reviewing portfolio regularly
Review your portfolio when your financial goals alter or when your life situation changes. It helps you fix your portfolio if a particular fund isn’t doing great or your portfolio is inclined towards an asset class.
9. Preparing for the bear run
If an investor is prepared for a certain percentage drop in the market every year, it may be easier for him to accept when the market is low and not make decisions in a panic.
10. Opting for tax-saving funds
Choosing tax-efficient funds helps you save on your taxes. ELSS Funds may be a good option to save tax under Section 80C of the Income Tax Act, 1961.
If there’s no risk, then there’s no reward. One cannot be insulated from market volatility. But, following the above salient features may help you take market risks in your stride and emerge as a successful investor.
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared based on publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, affiliates or representatives (“entities & their affiliates”) do not assume any responsibility for or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their analysis, interpretations & investigations. Readers are also advised to seek independent professional advice to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. The recipient alone shall be fully responsible for any decision taken based on this document.
Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.