Gain confidence in mutual fund investing. Explore dynamic asset allocation, risk management, and portfolio diversification strategies. Consult advisors to optimize goals and allocation
Description
Explore dynamic asset allocation, risk management, and portfolio diversification strategies. Consult financial advisors for personalized guidance. Stay resilient through market corrections with systematic investment plans (SIPs). Empower yourself with knowledge and navigate the equity market landscape with confidence. Start your journey to financial success today
Have you invested in Mutual Funds looking at the wow stock market returns, and as
the markets have corrected you looked in dismay at the red portfolio and thought of
stopping your SIPs or worse withdrawing your investments?
Did you also then think that I’ll restart my investments once the markets recover?
That’s a classic rookie mistake.
Or do you not understand Mutual Fund investments and hence stick to Fixed
Deposits?
Let me simplify Mutual Funds investments for you and then list out the right way to
invest in Mutual Funds.
A Mutual fund can be defined as an investment product that draws money from like-minded
individuals to buy different financial securities like gold, stocks, and bonds, among others.
The discussion on how to invest money in Mutual Funds is as important as to know
about the crux definition of ‘Mutual Funds. Here are a few guidelines which can
make you a very confident investor in the long run.
1. Develop a structured approach
a) First things First.
Remember when you were in school, you had goals. The more studious ones
would say that I want to score 90% in my class or that I want to get into XYZ B-school. The less studious ones would aim to clear all subjects.
That’s it! Have a goal in mind that you want to invest in.
b) Then identify, how much risk do you want to take with your
investments. Do you want to ride the bicycle with wheelies on the side
(be conservative) or do you want to take the bicycle on the hill for the thrill
(take a high risk aiming for higher returns)?
Take note that low risk will come with lower returns and vice versa.
c) Finally go for Asset Allocation
Simple. Don’t put all your eggs in one basket or all your money in just a
couple of stocks. You need multiple asset classes to be able to party.
Why? Because every asset class will not always give you the highest
return. Different market cycles will come with better returns in different
asset classes.
Effectively, the art of building an asset-allocated portfolio has shown better
returns over years than always trying to guess the next bet asset and
buying it at a high.
2. Practice Dynamic Asset Allocation
You’ve asset-allocated your portfolio. Great! Is that sufficient to take you
through?
Wait, there is a way to take your portfolio from ordinary to extraordinary and
that is through practicing Dynamic Asset Allocation.
Keep sufficient liquidity for market corrections to deploy to equity.
When the markets take a large dip say for example 15%, move 50% from
fixed income to equity and then once the markets recover enjoy the party!
3. Consult a Financial Advisory Firm to choose the correct investment portfolio
When you need to redesign your house, you don’t start breaking down the
walls yourself, right? You hire a contractor. Why? It's their job. They know it
best. They’ve been doing so for years.
Picking a chocolate bar at a departmental store on your friend’s advice could
be a good idea, but investing in a mutual fund policy solely on that basis
without seeking professional advice can be a diabolical thought to
entertain. Mutual Fund Advisory firms are professionally trained to
educate the investors on nuances of mutual fund markets, which a
relative outsider or an occasional investor would not know.
True, taking the assistance of a Financial planner will have a cost associated but
Financial Planners have been able to offset the cost with the returns generated
over the long term.
It’s the same as going to a specialized doctor for an ailment for treatment
rather than a DIY approach at home. It doesn’t work and you continue to
suffer.