Im­bibe These Traits To Be­come A Bet­ter In­vestor

Dalal Street Investment Journal - - EXPERT SPEAK | PERSONAL FINANCE -

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.


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.


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.


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.


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.

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