scorecardresearch

Things to be mindful of while DIY Investing

Investors be it DIY or otherwise tend to get swayed by market volatility and headlines relating to developments across the globe. Based on these, investors tend to make hasty buy and sell decisions, both novice and experienced.

mutual fund, mutual fund investment, MF, equity markets, diy investment, diy, do it yourself, equity mutual funds, Large-Cap funds, ICICI Prudential Bluechip Fund, Mirae Asset Emerging Bluechip Fund, PGIM Midcap Opportunities Fund, Nifty, Quant Active and Small-cap Fund,, health insurance, health insurance needs, Omicron wave, Domiciliary treatment expenses, low waiting period, Consumables cover, super top-ups
Over the long term, multiple such actions could have an adverse impact on one’s overall portfolio and its ability to generate returns.

When it comes to investing, every investor wants to be in absolute control of their investments. Of late, experts say this control has largely emerged in the form of DIY (Do It Yourself) investing.

However, what is often left unnoticed is the impact behavioural biases render on an investor’s decision-making process. 

Chintan Haria, Head – Product Development and Strategy, ICICI Prudential AMC says, “Investors be it DIY or otherwise tend to get swayed by market volatility and headlines relating to developments across the globe. Based on these, investors tend to make hasty buy and sell decisions, both novice and experienced.” 

More often than not, such decisions tend to be erroneous. And over the long term, experts say multiple such actions could have an adverse impact on one’s overall portfolio and its ability to generate returns.

“Given that we invest to generate consistent returns over a long period, it is very necessary to ignore the charm of quick returns over shorter timeframes and stay invested during volatile times instead of rushing to turn the notional loss into a permanent one,” explains Haria. This is another aspect a DIY investor should be careful about.

Another aspect, experts say a DIY investor must watch out for is the urge to go overboard in an outperforming asset class. For example, Haria explains, over the past two years, when Indian equities had a stellar run, investors would have found it very difficult to book profits in equities and allocate to various asset classes. But historical data time and again shows that having a balanced portfolio triumphs in the long run. 

Hence, by spreading investments across various asset classes, there is an in-built risk mitigation system built into the portfolio. 

So, if you are a DIY investor and wish to keep away from these pitfalls, according to experts one of the easiest ways to do that is to seek the aid of a professional by investing in a passively managed multi-asset fund. 

Doing so, the fund manager will actively move between asset classes through instruments that are passive in nature. For example, in the case of a Multi-Asset Fund, which allocates 25 per cent-65 per cent to domestic Equity ETFs and Index Funds, 25 per cent-65 per cent to Debt ETFs and Index Funds, 0 per cent-15 per cent to Gold ETFs, and 10 per cent-30 per cent to Global Equity ETFs, an investor at very nominal expense gets access to a variety of asset classes within a single fund.

Haria adds, “Since the fund is invested across multiple asset classes which have very low correlation, it provides much-needed stability derived from optimal diversification. It also keeps an investor away from trying to time the market.” Here, on behalf of the investor, the fund manager on an ongoing basis rebalances the asset allocation on basis of various parameters like market valuation, triggers, etc. 

Furthermore, through the exposure to international equities, there is also an element of geographical diversification. For instance, in the case of a multi-asset fund scheme, an investor has exposure to international ETFs catering to technology, aerospace/defence, biotechnology, agribusiness, etc. 

Haria points out, “Within domestic equities, the fund manager here has the flexibility to choose sectors/themes and allocate between large, mid, or small-cap in order to generate alpha. With no tax impact on re-balancing and professional expertise for investing in domestic and global markets, the scheme emerges as a one-stop low-cost investment solution. This makes it a win-win for investors as the endeavour here is to gain from better risk-adjusted returns.” 

Hence, if you are looking for an ideal solution for multiple problems like selection, sizing, timing, and taxation, and is as easy as DIY investing, a passive multi-asset fund can be an optimal solution.   

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Money