Nilesh Shah’s mantra for achieving financial freedom: Invest through SIPs, don’t redeem till you need money

By: | Published: August 31, 2018 11:04 AM

Urging investors to not switch or redeem their mutual funds unnecessarily, Nilesh Shah of Kotak Mutual Fund said that SIPs are the simplest way to achieve financial freedom.

“The simplest way to achieve financial freedom is SIPs,” Nilesh Shah said. 

Urging investors to not switch or redeem their mutual funds unnecessarily, Nilesh Shah of Kotak Mutual Fund said that SIPs are the simplest way to achieve financial freedom. “We all need to have our financial freedom. The simplest way to achieve financial freedom is SIPs. Keep investing small amounts of money on a regular basis for long-term in equities, and over a period of time, it will create your financial freedom. Be a long-term and regular investor to remove your financial worries,” Nilesh Shah, Managing Director, Kotak Mahindra AMC said in an interaction with ET Now.

According to data from AMFI, a whopping 51% of equity assets get withdrawn before a year gets over. Decoding reasons for such investor behaviour in mutual funds, Nilesh Shah said that lack of knowledge and the urge to make quick bucks is leading to this. “Lack of financial knowledge is the critical factor for investors pulling out of funds within a year. Many people invest thinking that they’ll get a lottery in equity mutual fund. People believe that by jumping from one fund to another they will make money,” he said.

Shah said that investors look at very short-term performance, and shift to a better performing fund. “They look at 3-month and 6-month performance, and move out from a poor performing fund to a better performing fund. This urge of making quick money is the reason why people end up taking short term view on equity rather than a longer-term view. The same behaviour is seen in equity market as well. There are more people trading rather than investing,” he told the channel.

According to the expert, investors should hold on to their investments in mutual funds, unless they need the money. “The ideal holding period in mutual fund is till such time you don’t need money. If you don’t need the money, don’t redeem money unnecessarily. In a rising market, you will make quick money in 3-6 month period. There is no shortcut to success,” he said.

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