Technology, search engines and algorithims have put in the hands of the individual all the information needed to make any investment decision. There are portals offering the option and asset management companies (AMCs) have direct plans in mutual fund schemes for investors. However, the some questions needs to be asked: Am I capable and competent to undertake this activity? Do I have the knowledge to invest on my own? Do I have the time to execute the transaction? Can I keep track of the portfolio? Most importantly, do I have the temperament for DIY (do it yourself) investing? If the answers are ‘yes’ to all the above questions, read no further. However, if you indeed want to adopt DIY, in your investing journey, you can do it, provided you have discipline and adopt a process-oriented approach. The most important aspect in DIY is not money management, but managing one’s behaviour. Understanding self and the biases is the key.
Keep a checklist
Maintaining a checklist of one’s behavioural pattern and then accepting the same in the investing process is the approach. For a DIY investing, it is important to have the goals, time horizon, asset allocation and liquidity needs, in place—same as any other investor whose investments are managed by professionals. Equally important is that the portfolio is reviewed at more frequent intervals, on a monthly basis. You can set aside 30 -45 minutes of the first Saturday or Sunday of the month in this regard.
Keep track of the options adopted at the time of investing—dividend or growth, whether dividend has been declared by the AMCs and if the amount been credited, and bank details and addresses updated.
Understanding of debt funds
The DIY investor needs to have basic understanding (and should endeavour thereafter to continuously update and upgrade) of debt funds—how it reacts to interest rate movements or credit paper quality in the schemes, being proposed to invest. For investing in equity scheme, know the difference between a large cap, multi-cap , small and mid cap fund.
DIY can be a evolutionary process. If you are keen to manage your investment portfolio on your own, you could start with professional support and then gradually, understanding the concepts and basics, can over a period of time – say 2-3 years, stop the services and begin to manage on your own.
The writer is managing partner, BellWether Advisors LLP