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Investor Mindset: Four Ways to Develop - ABSLMF Blog

Working on the Investor Mindset

Mar 06, 2020
3 mins | Views 9316

Let’s get the basics right

Each one of us has EMIs to pay, families to look after & many other financial aspirations; and hence, each one of us has back-up plans in the form of investments. Investments, especially in mutual fund schemes, need planning, patience and time.

In this digital era where the minutest of information available online, it is not your technical knowledge that may result in a wrong call, but your mindset. A good financial advisor will not just recommend the suited products to you, but also educate you about the ups and downs of the equity market. Most investors believe in making money, while the market is looking good and redeeming when it is not. However, a good advisor will tell you the importance of staying invested for the long term.

In a market like Mumbai, which is dominated by investors making lump sum investments, there should be awareness about Systematic Investment Plan (SIP) mode of investment and the advantages it carries. SIP is a way of ensuring that you save the money that you are otherwise likely to spend.

Once you are in the race, go full throttle

As a new investor, for your financial well-being, it’s imperative that you consider your age, risk profile, financial goals, investment horizon etc. to select the schemes suited for you. You should also aim to diversify your mutual fund investments across various types of schemes. Say for example you want to save for a long term goal (10+years), you may consider investing a small proportion in the small and mid-cap category of equity mutual funds, though they are riskier but they also have potential to earn reasonable returns over the long term.

These days we all have easy access to data pertaining to fund performances, risk return ratios, stock portfolios etc. You can use this data to gauge if your advisor is suggesting the right schemes to you, which are attuned to your risk profile. Moreover, you must learn from others’ experiences. If you are in your 20s, you can start small as you are about to begin your financial journey. But if you are approaching 40, you may want to relook at your financial goals and realign your investment portfolio as per your needs.

Don’t time the market; instead, give time to the market

Also, it is important not to panic when the market dwindles, and we cannot stress this enough. When you get your monthly portfolio update, and if you see negative returns anywhere, that may probably be the time to invest more money rather than panicking and redeeming your money. You look at any incident from the past; the market revives itself sooner or later, all you need to have is patience. It is thus, not a good idea to keep checking your equity investments every now and then. If you ask us, you should review only once a year; unless when you need money or want to invest more.

Otherwise, the best way is to invest and forget. Let the Power of Compounding do its magic on your investments with time as the facilitator. You see, what you earn in 5 years may get you profits but not change your life. However, what you accumulate in 10-15 years may define and change your future.

Towards the end

In conclusion, we would like to reiterate that it is very important to make a beginning and start investing as early as possible, no matter how small the amount is. Do keep in mind the simple logic of considering equity instruments for your long-term money goals and invest in debt instruments if you have short term goals. And at the end, always remember that it’s better to take help of an advisor, instead of making hasty decisions based on tips which may prove detrimental to your financial health.

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

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