This Dussehra, investors must look into the evil habits of their investment strategies, which are harming the good long-term investment portfolio that they are looking to create.
Dussehra or Vijaydashmi is a festival that depicts the victory of good over evil. The 10 days’ celebrations of Durga Pooja end with Dussehra. On this day we celebrate the victory of Lord Ram over Ravana as well as Durgotsava that depicts the victory of Goddess Durga over the demon, Mahishasura. Both these festivals are celebrated across the country with great enthusiasm to epitomize the victory of good over evil.
This Dussehra, investors must look into the evil habits of their investment strategies, which are harming the good long-term investment portfolio that they are looking to create, and to gain victory over these evil habits. So what are some of these evil habits? To name a few, they are – trying to time the market, not thinking long term, engaging in herd mentality, focusing too much on recent historical returns, not having an appropriate asset allocation etc.
However, the biggest and the most evil habit in case of investing, that leads to poor investment experiences for investors is the greed for more returns during market upswings and irrational fear of markets during corrections. Investors often tend to make hasty decisions with their money and investments. During poor or volatile market conditions, investors tend to withdraw their money from the markets with the fear of fewer portfolio gains or they make hasty big allocations after markets have run up sharply.
The first step towards right investment is to review your investment portfolio following a goal-based approach. It is advisable to start with identifying your financial goals; queries like which is the best mutual fund in the market or which mutual fund could give the best returns, may not be the best strategy to start your investment expedition.
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The most important rule of investing to beat evil habits is to focus on asset allocation – that is spreading the portfolio between equity and debt. Investors with a short-term horizon must opt for debt mutual funds. Similarly, investors looking at long-term horizon should choose equity mutual funds as per reasonable risk appetite. While equity markets may be volatile in the short term, they tend to deliver better returns in the long run. The goal is to keep your patience and commence the investment journey with regular investments in order to accumulate a significant corpus over a period.
Lastly, what is not advisable is the ‘invest and forget’ strategy. It is of utmost importance to re-evaluate and re-balance your investment portfolio on a regular frequency – such as annually. It is necessary to go back and analyse your investment portfolio, as companies’ performances change and so do their strategies. One must re-evaluate and re-balance their investment portfolio to understand and make sure whether the investments are still in line with the desired goal.
Investments may not always be simple; the key is to follow a systematic and disciplined approach towards investing. Once you have the right strategy and goal in place, you must stand and follow the same route. As long as your investments are defined by the long-term strategy, your investments are bound to give you good returns and wealth. Therefore, let this festival mark your victory on your evil habits that are harming your portfolio and beginning towards a long-term investing journey to achieve your financial goals.
Finally, if you are a new mutual fund investor, it is advisable to consult a trusted mutual fund guide or advisor before investing, who could help you understand your goals thereby, personalizing your portfolio.
(By Ashwin Patni, Head Products & Alternatives, Axis AMC)