There are people who are disciplined and there are who are not. What is the difference between these two sets of people?
The first set of people lead an orderly, healthy and peaceful life, prepared for the ups and downs, not upset with the lows, and make others feel comfortable in their company. The second set of people are those who keep moving from one crisis to the other driven more by circumstances and responding to them wholly unprepared, which takes a toll on their health, peace of mind and relationship with others.
Why discipline is necessary?
Discipline is a key factor to be a successful long-term investor. Why do we need to invest at all? The answer is to meet our short-term, medium-term and long-term financial goals. Our idea of investing is not getting returns from one single transaction, but to invest and generate returns in multiple transactions over a period of time so that we can meet all our financial goals.
Disciplined investment plan
The discipline of writing something down is the first step toward making it happen. We are living today much longer and we are going to live much longer tomorrow. Most people are not in a position to earn by working once they are above 75 years of age. If they have to live another 15 years or so they would need money and with inflation, they would need more money than today, to lead the present lifestyle.
Hence, a disciplined investment approach will help achieve their long-term financial needs. For this, one has to invest in equity more, when one is young, and after doing it for 25-30 years may start moving towards debt. You need to invest in such a way that your investments are beating inflation at least during the accumulation phase, i.e., pre- retirement phase.
Investments in blue chip company stocks, good mutual fund schemes, gold ETFs and fixed deposits with banks over a 30-year period will help you to build a financial castle which will take care of all the earthquakes, cyclones, and droughts of life beyond 75 years of life.
Some disciplines to ponder over
Create a customised financial plan, implement the financial plan and stick to the financial plan regardless of market conditions. Create an asset allocation ratio based on your risk taking appetite and required rate of return; re-balance periodically and maintain the same asset allocation. Continue your mutual fund SIP till you meet your financial goals and don’t stop in-between. Most importantly, review your financial plan and investment plan regularly.
The writer is director & chief financial planner, Holistic Investment Planners.
Extracted from Tax Guru