Imbibe These Traits To Become A Better Investor
Investing money judiciously to achieve different investment goals is the most important activity for your financial life. Therefore, it is important that you plan your investments in a manner that there is enough to fulfil requirements at different stages of your life. It is equally important to imbibe certain traits that can not only help you in starting the process right, but also in ensuring that it remains on track through your defined time horizon. Here are some of these and how they can make you a better investor:
You must think big at the start of your investment process. It is quite common to see investors following a haphazard approach of investing in different asset classes and exiting from them depending on how these asset classes behave at certain points. Needless to say, this approach often makes them miss out on opportunities in the market. Therefore, while planning your investments, you must look at the bigger picture by establishing your goals to be achieved over short, medium and long-term horizon. A goal-based investment process ensures that you follow budgeting, give risk management its due and follow an asset allocation model that helps in creating the right balance between risk and reward.
REMAIN COMMITTED TO YOUR TIME HORIZON
Once a time horizon is assigned to a goal, you must remain committed to it. This approach prepares you to tackle the volatility without having to worry about its impact on the portfolio in the short term. Besides, if you continue your investment process uninterruptedly, you benefit from averaging.
LISTEN CAREFULLY TO ABSORB KNOWLEDGE
Today,a lot of information is available for you on various investment options and strategies to invest in them through different media. Hence, you must be open to absorb this knowledge and use it in your investment process. If you find it overwhelming to analyse this information, donot hesitate to take the help of an advisor. Once you start working with an advisor, listen to him/her carefully as that can go a long way in allowing you to tackle the complexities of the investment world. The unwillingness to listen can make it difficult for you to adapt to the everchanging investment and economic environment.
It is a proven fact that there is no straight path to investment success. Hence, your investment process as well as options must provide you the flexibility required to realign your portfolio in line with your changing circumstances as well as economic and political environment. Besides, you may have to contend with the challenges in the form of volatility and non-performance of some of the investments in your portfolio. Therefore, investing in open-ended mutual funds can be a much better option than investing in traditional options that do not allow you the required flexibility. However, donot get tempted to make frequent changes just because you have the flexibility to do so. Also, avoid discussing your portfolio with all and sundry as conflicting views on your portfolio composition can make you lose your focus and compel you to make investment decisions that may compromise your financial future.
AVOID BECOMING EMOTIONALLY ATTACHED TO YOUR INVESTMENTS
Many investors get emotionally attached to their investments and that makes it difficult for them to make changes, when required. While it is important to keep track of the progress of the portfolio, it is equally important to be open to make changes in the portfolio in case some of the investments underperform their peer group and benchmarks for prolonged periods. However, it should be done only by after giving sufficient time to fund managers to perform and prove their worth over different market cycles.
KEEP GREED AND FEAR AWAY
Allowing greed and fear to cloud your investment decisions can be harmful for your financial health. While greed can take you beyond your defined level for risk, fear stops you from looking beyond traditional options like fixed deposits and small savings schemes.