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    A middle-class investor’s guide to investing

    Mar 12, 2020
    3 mins | Views 8930

    Whether you are a first-time investor or a seasoned one trying out a new investment vehicle, the most important thing is to make a decision based on your own research and be convinced with it. For middle-class investors, even the smallest of short-term goals is a huge deal because there are a lot of dreams and hard-earned money invested in it. But does that mean, it is difficult to achieve? Of course not! You have to stick to your decisions and turn off the noise.

    Window Shop but avoid influencers

    When you have to purchase a TV, you don’t go to the showroom directly; instead, you ask around for the best offers and better products. The approach is same with your finances and investing. You have to window shop in order to know what’s best for you. And there shall be many influencers trying to convince you about various products by dumping data on you, but collecting information from it is your prerogative.

    I have been a mutual fund distributor for 19 years now, and the amount of exposure today’s investor has is unprecedented. With social media and technology becoming our best friends, of course, there is the ease of queries getting resolved and one-touch information; but with increased exposure, comes the risk of negative influences as well. Especially when the markets are plummeting (which is as normal as the cyclical weather conditions), the constant negative feed can get disarming.

    It is thereby important to know when and how to cut the noise off. Go with the facts. I collect data, evaluate your goals and risk coverage, and provide you with software-generated reports that talk only in statistics. That helps in stating facts as they are. Hence, the mantra- you listen, you make decisions, and you stick to them.

    A word of caution for the Millennials

    I see a few major (fading) trends with millennial investing-

    • A shift to technology-driven rather than human-advisory investing platforms

    • A shift to direct investing

    • The need to see quick results/ A fidgety approach to investing

    While I understand it is all about convenience now, I shall only talk about the after-effects here. I see that almost 10% of my new clients every year are the ones shifting out of technology-based investing. This is because investing is not a one-time activity; rather, it is a process that requires reassurance and human touch. And middle-class investors value that more than any other. Similarly, as per AMFI data, the average investment tenure for a direct investor is 9 months; after which he/she switches to another scheme. This is again a result of getting influenced by many sources rather than sticking to one genuine source of information (advisor). Lastly, I always say, mutual fund investments can be boring because you need to wait for at least 10-15 years to see the results. But that is exactly why they are effective because they teach you discipline.

    Pillars of investment

    The two pillars of financial planning are Investment and Insurance. Investment for short, medium and long-term goals and Insurance to secure your life, health and any disability.

    I believe in being a single go-to source for both, and I’d advise investors to work with an advisor who allows you to make your own decisions rather than deciding for you. You can look at the data he/she presents to you and derive at what’s the most beneficial for you.

    The best approach could be to converge your own SLR (Safety, Liquidity, Returns) needs to the portfolio you are creating for yourself. Always remember that returns alone cannot be the only criterion for you to disregard an investment. You have to ensure there is enough liquidity and then, of course, your money needs to grow.

    At the end of it all

    Patience is what makes an investor wealthy. If you are on an onward flight to the USA, you cannot just change your mind and get down at Dubai, right? Similarly, you must not redeem until you achieve your financial goal. This perseverance rewards you in surprising ways, and the happiness of having achieved your goals is much sweeter then!

    Mutual Fund investments are subject to market risks, read all scheme related documents carefully

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