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Posted On Friday, Jan 24, 2014
The recently concluded Standard Chartered Mumbai Marathon was an event to witness, hundreds of runners congregating early morning at 6.00am, waiting to make the grueling run in the 'cold' Mumbai morning.
Some train for this run for almost a year, some run to support a cause but ultimately there is a sense of achievement as the runners cross the line, or improve their times from last year.
For running a marathon you have a choice, either you start training early and build your stamina and strength gradually by working out regularly, running hard, sweating it out or you may decide you are fit enough and just turn up on that day, attempting to beat the Kenyan runners who seem to be genetically enhanced for long distance running and have a vice like grip on the top slot.
So who do you think stands a better chance of doing well at the marathon, the one who trains regularly or the one who turns up at the last minute? Chances are the one who trains regularly may do better right?
Investing for your future is just like running a marathon. You have to have a goal in mind, plan towards achieving that goal, have the discipline to stick to the regimen chalked out for you and of course take professional advice so that you don’t do the wrong thing or worse pick up injury.
The same parallel can be drawn when speaking of investments. You need to have a financial goal like retirement plan and to achieve that goal in a disciplined way by investing right. You don’t wait for a lump sum at the end of your career to plan for retirement, you start today by investing through Systematic Investment Plan (SIPs) and build a corpus gradually. And of course take regular advice from a financial advisor on planning your investments right and reviewing them regularly so that you do not stray from your goals.
If you are investing for the long run (pun intended here!) then follow the principles stated below, and hopefully you will cross the finish line successfully!
Set your investment strategy
Do you want to run the full, half marathon or the dream run, here’s what you need to do in the marathon that is your financial goal
•Your investment goals: You should set your financial goals for which you want to invest
•Your time horizon for investments: The time period for which you want to invest depending on your investment goals.
•Your tolerance for risk: You should also gauge your risk appetite i.e. the amount of risk you are ready to take.
Have a financial plan – You need to know when to run, when to jog and when to pick up the pace again, even when it comes to investments.
Having a financial plan helps you deal with a volatile market in a much better way. A financial plan includes the following steps:
•Set and prioritize your life goals.
•Check your existing investments and the role they will play in meeting your goals and also whether the current set of investments are the right ones for you.
•Identify the right investment instruments including how much insurance and an emergency reserve should you have to take care of your dependents.
•Track and review your investments.
Invest through Systematic Investment Plan (SIP)
Running for the long distance requires time and patience, trainers say go to the point which you think you can’t go beyond and seek to go 10 paces beyond that every day. Small daily regular gains lead to a successful run. The runner needs to maintain the discipline of training every day and eating right throughout the year if he has to be successful.
Similarly a Systematic Investment Plan (SIP) is a vehicle offered by mutual funds to help investors save regularly. Systematic Investment Plans are recommended as one of the best way for investments in the volatile markets. With the power of “Rupee Cost Averaging", SIPs have the potential to minimize losses and generate returns. An SIP may ensure disciplined investment irrespective of the market movement. You can invest in equities through mutual funds for as low as Rs 500 a month. That is the wonder of Systematic Investment Plans - Invest big through small savings. Investing through the SIP route helps you make regular investments at regular intervals and can help you gain from the benefit of compounding.
Rebalance your portfolio
Measure your gains regularly, change the way you train if you are not getting the desired result and most importantly train with an expert to ensure a smooth run.
Coming to finance when the market is volatile, one of the best ways is to review your portfolio i.e. to check the performance of the funds in your portfolio and their exposure to risk. Be sure that you are not too over exposed to one particular sector. Some small adjustments in your portfolio might help you to give you long term profits.
Just like it takes hard work and effort to train yourself for a successful marathon, it takes dedication and discipline to maintain and create a financial corpus that will be required to fulfill your financial goal. And just the way training and running for a marathon keeps you physically fit; investing regularly will ensure your financial fitness so that you do not need to sweat unduly when funds are needed.
Take small steps to achieve big dreams! Start your investment journey today!