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Posted On Saturday, Aug 01, 2020
Achieving discipline in investing is NOT easy.
Despite our best intentions, we often make poor investment decisions. Market movements and short-term gains cloud over our judgement.
We react emotionally to markets. This is why we incur unnecessary losses and steep transaction costs.
Now, you may even have a long-term investment plan in place. But inexplicably, you don't follow it.
This is exactly what we want to talk to YOU about today.
Think about it.
All the investing greats tell us it's the best way to generate wealth from equity markets.
Just start early...
And then, invest as much as you can.
If you do this, you will maximize your chances of accumulating a great deal of wealth over time.
Disciplined investing is pretty straightforward to understand. And yet it may be one of the most difficult things to follow.
Today we present to you our top rules for disciplined investing in Equity Mutual Funds that could help you accumulate all the wealth you desire...
1. Set long term investment goals
Why are you investing? Will you need your cash back in six months, a year, five years or longer? Are you saving for your retirement or to buy a home?
Once you have your goals in place, it's easier to estimate how much capital you will need. Work out what kind of return on your investment you need to produce the desired result. Here is an easy to use goal planner we made to help you get started.
Wealth creation in equities happens over the long term. If you need to recover your money in six months or less, consider a shorter term investment. Liquid funds are great short-term instruments.
Aim to compound your initial investment over long periods of time. This enables you to reap the full benefits of investing in equity mutual funds. Short term gains may well be tempting. But we recommend holding on for potentially big long term gains!
2. What is your current level of risk tolerance?
As you become more familiar with the various investments, your understanding of the risk associated with them will improve. You may now consider certain equity investments less risky than you imagined earlier. You may now be willing to increase your exposure to it.
The idea of perception is important in investing. Perceptions can change over time. In a bull market, equity investments look less risky. In a bear market, they are more risky. If you get swayed by emotion, you could get into trouble.
It's important to know yourself well.
So, what is your current level of risk tolerance?
Depending on your response to this question consider instruments that match your profile.
Here's a simple way to match your investments to your risk tolerance...
For instance, if a 20% temporary fall in investments unnerves you, then probably you should stay away from equity investments since such falls are not uncommon.
On the contrary, if you have money to spare for the next 10 years or so, invest in equity mutual funds.
3. Pick an asset allocation strategy that works for you:
Build a prudent asset allocation plan based on individual long-term financial goals. Stick with these allocations over time, rather than reacting to market turbulences. This will help you capture your fair share of the investment returns.
For example, if you have a moderate risk profile, consider investing in a multi-asset fund. A fund with balanced exposure to Equities, Debt, and Gold would be ideal for your risk profile.
Following a systematic plan (SIP) to invest in the funds of your choice is a great way to stay disciplined and stick with your strategy.
4. Don't be emotional
Equity mutual funds many a time work contrary to our expectations creating insecurity. Should I sell now to avoid a loss? Should I sit back and wait for prices to rebound? These thoughts can distract the most disciplined investors.
Refrain from revising your asset allocation due to market ups and downs. Create your portfolio for your long-term needs and maintain it for this purpose. Irrespective of what's going on in the markets today, build your portfolio for the long haul. This gives it the greatest chance to fulfill its intended purpose.
Investing in equity mutual funds is not difficult at all. It is like any other of your successful endeavors. Give it the time, effort and discipline it needs to see your wealth grow.
Next Step: Use our free tool to build your own customized asset allocation plan.
Editor's Note: Our Founder, Ajit Dayal, follows an asset allocation model that has stood the test of time. He recently revealed details of this model in a video. Watch it HERE (no registration required). At Quantum we follow this same approach when interacting with investors. If you want to talk to us, you can write to us at [email protected]. As always, we will be happy to assist you.
Disclaimer, Statutory Details & Risk Factors:
The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.
Mutual fund investments are subject to market risks read all scheme related documents carefully.
Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the sponsor / AMC / Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.
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