Small investors tend to be distracted due to short-term market movements. I still recall, the first-time equity investors’ portfolio was down, they had all their apprehensions and were seriously disturbed whether they should continue with those funds any longer! The time, when this lot of small investors started complaining and discussing about their investment agonies and failures, I decided to study the deep routed causes and have an insight into this cause and effect relationship. And finally one fine day, I compiled a few facts, no doubt, strange but true...
I tried to analyze various portfolios and found a minefield of investment disasters. Not just the criteria and selection of mutual fund schemes were ill-advised, even the strategies seemed to be flawed big time. Hey, I must say, this rather appeared to be an epitome of “How Not to Invest in Funds".... On a serious note, sadly this group of investors represents the average Indian Mutual Fund Investors... These errors being elementary - the cardinal sins of mutual fund investing, so to say, but in a sense very common...
But if there are problems, there are solutions at the same time.. Highlighted below are some of the frequent mistakes, no worries, with solutions to rectify them and rather eradicate them to some extent....
1. Around Festival Season lot of Marriages get solemnized. It happened once, one Mr. Nair had to attend lot of marriages, coupled with some guests, he even had to take them for sightseeing and the impact, and he was down with a severe food poisoning. Now look his treatment, silly chap, he almost left food for a fortnight, further leading to a weak body. In the same fashion you see, most of the Investors in India remained aloof from the Investment scenario for almost one and half year. They had excuses of all types on this earth. We, all investors need to understand that investment is also like taking regular meals. Why we take three meals a day, because our body system requires it. Doctors always suggest to take regular meals even you are sick, but on the other hand people start skipping meals. Off course, one should avoid unhealthy food during sickness, but at the same time, one should avoid unhealthy food even you are healthy. One should try to correlate the food habits with your investment pattern.
2. A bad investment is a bad investment like an unhealthy food is an unhealthy food. Quantum of damage can be different from person to person. Individual focus should be to have good investment regularly like digesting food before next meal. Similarly, one should also invest regularly for countering the volatility of markets. Skipping investing in lean period is like fasting during working hours.
3. Investing in new funds led to big losses initially. Remember, our elders use to tell, do not take food from an unknown place. So, take a clue do not invest in NFOs, because, they are unknown. We should rely on this piece advice from our elders and invest in time tested performing funds. Finding the best funds is not a rocket science after all.
4. Size matters in fund management, like water does not become bad in running rivers. So, see the Corpus of a Fund before investing.
5. Have a balance diet. Salad is a good compliment to your food, but one can not survive on it alone. Regular food should contain some grains, vegetables, fruits, oils, dairy products and for non-vegetarians some fish/meat/chicken is always like a cherry on cake. The final diet requirement varies from person to person. Same is the case with proper asset allocation, which is required for investments and varies from one to another as per risk tolerance and time frame requirement of any individual.
6. Eat food, which you can digest. Every investment has some sort of risk. One should not take on more risk then one can face it. Exposure to equities should be in accordance to risk tolerance capacity. Like it becomes risky for elderly persons going for a brisk walk.
7. Adapt yourself with your risky investments. Soldiers from planes, normally have to be acclimatized, when shifted to high hills. The same is for the first time investors, they should not be allowed an over exposure to equities.
8. Accept the fact again; do not put all eggs in a single basket. We normally make small packs, if we have to carry it of our own. Take it easy man, like even in prisons; all are not kept in a single cell.
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