Aditya Birla Sun Life AMC Limited

Investing is an art that changes its strokes with time

Jan 30, 2020
3 mins | Views 9237
Mr. Saurabh Rathi

You, the new-age investor, are poles apart from the investor of the past who was mostly drowned in paperwork and would have to wait for weeks to see the result of one financial decision. You are more packed with knowledge, you see the changes live, you have the data at your fingertips, and you know the basics. But there is always a flipside to the information available- there’s too much of it. And you need a specialist to make sense of it and assist/course-correct you to make the correct decisions. Financial advisors are more like financial doctors, one wrong advice, and it can ruin the financial structure an investor like you have worked on, for decades together.

Like in a cricket match, an advisor is someone who plays right in the middle of the stadium, while you watch on your television. More often than not, he will know the facts better than you. There is a reason why specialists like lawyers, doctors, financial advisors exist. It is not that you cannot function without them, but your chances of getting into trouble without their proper guidance could be higher.

Let us get to the most-asked questions-

How do I figure my risk appetite?

Do you think your Blood Pressure will fluctuate with the volatility in the market? If yes, then perhaps your risk appetite is lower. We do not want you to spend your returns on medicines now, do we?

I have invested in equity mutual fund schemes via SIP. Should I withdraw if the market crashes?

Suppose you buy potatoes worth Rs 100 per kg every week and you are told that for the current week they are at Rs 60 per kg. In this case, do you stock up for coming weeks, or you stop buying/sell your stock? Why is it different for mutual fund units?

For any investor investing via the SIP route, market volatility could be great news. You could gain more units when the market is falling and is volatile and make more from these accumulated units when the markets rally.

How do I approach investment if I am a retired senior citizen?

Keep these in mind:

  • Accumulating wealth is important but of no use if you don’t have a disposable income

  • Use the accumulated interest to start a Systematic Transfer Plan in order to take care of your monthly expenses

  • Always keep the principal amount intact

  • The remaining investments can be split between equity schemes depending on your current and future liabilities based on your risk profile/appetite

How much information is too much information?

If you want your investments to make money, do not watch television every day. You might not find a lot of points of view when you follow the opinions out there because all of them want to follow a herd while counter-opinions may be massively judged and called out. The only truth of the game is that market ups and downs have always happened in the past, are happening now and will continue to happen. It is a sign of a healthy economy, when you are invested for a long-term, it must not deter you.

Which one is better- direct equity or equity-related mutual fund schemes?

While direct equity may have the potential to provide you with returns at one go, it lacks the investing discipline an SIP can provide. You can evaluate all investment vehicles such as direct equity, mutual fund schemes, real estate etc.; consider the pros/cons and risks associated with them, your risk appetite and then decide which bracket do you fall into? It may be a good idea to keep 10-20% of your portfolio invested in mutual fund schemes to maintain diversity and long-term investing discipline.

Call to Action

It is “time’s up” for a passive investing style where you’d invest the money and forget about it for years together. Now is the time of active investors like you, who take informed but dynamic decisions about their money depending on how the market is and what your risk-taking ability and goal is. You must review your investments every quarter - not every day and not once a year but every quarter. India is on a change trajectory, and many of the micro-economic factors may not matter in the long run. There is a high possibility that the country is bound to perform, and every time the markets are down, they are bound to bounce back. Hence, know your goals and keep investing

The views and opinions expressed are those of the distributor and do not necessarily reflect the views of Aditya Birla Sun Life AMC Limited (“ABSLAMC”) /Aditya Birla Sun Life Mutual Fund (“the Fund”). ABSLAMC / the Fund is not guaranteeing/offering/communicating any indicative yield/returns on investments.

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

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