Are You Investing Judiciously?

Investing money judiciously enhances the chances of ensuring that you have adequate financial resources to achieve your different investment goals for different stages of your life. The key factor to achieve investment success over time is to follow an investment process. The process should begin with deciding the right asset mix so that there is a proper balance between risk and reward. Although there is a plethora of investment options that can help you realise your financial dreams, it is crucial to make the right choices and invest in a disciplined manner, which encourages you to save and invest regularly. [EasyDNNnews:PaidContentStart]

While setting a target for each of the goals is important, it is equally important to revise these targets for long-term goals such as retirement planning as well as children’s education, as these require you to accumulate a large corpus and consider inflation to avoid any gaps in what you may require and what you may end up accumulating. 

To get this process right, you need to follow certain investing principles. Here are a few guidelines that can go a long way in keeping your investment process on track. 

Have a clear roadmap 

Investment success can be achieved by following a disciplined investment process. On the other hand, a haphazard investment approach may compel you to pare or increase your equity exposure during different market phases. Hence, make sure to create a roadmap right at the start of your investment process. This would involve establishing your goals to be achieved over short, medium and long-term horizon, assigning a time horizon, and determining how much to invest to achieve each one of them. Remember, a goal-based investment process ensures that you follow budgeting, give risk management its due, and follow an asset allocation model that can create the right balance between risk and reward. 

Avoid shifting your goalposts 

The time horizon for each of your goals plays a key role in determining your asset allocation, which in turn determines the attendant risks and probable returns from your portfolio over a defined time horizon. Therefore, you must remain committed to your time horizon, irrespective of the market volatility, and continue your investment process uninterruptedly. This commitment will not only help in reducing the impact of volatility on your portfolio but also hasten the turnaround through averaging. 

Have flexibility, but avoid frequent changes 

While investment is an ongoing process, there is no straight path to investment success. Therefore, your investment process and chosen investment options must have the flexibility so as to rebalance your portfolio, in line with your changing circumstances, as well as economic and political environment. Besides, you must be prepared to tackle the challenge of a dip in the performance of some of the investments in your portfolio during certain time periods. While monitoring the performance holds the key to long-term investment success, it is important not to get tempted to make frequent changes just because you have the flexibility to do so. 

Also, you must refrain from discussing your portfolio with all and sundry, as conflicting views on your portfolio composition can make you lose your focus and compel you to make investment decisions that may compromise your financial future. 

Be open and collaborative 

Last but not the least, you must always be open to absorb the knowledge and use it in your investment process. Today, a lot of information is available on various investment options and strategies to invest in them through various media. If you find it overwhelming to analyse this information, do not hesitate to take help of an advisor. Once you start working with an advisor, listen to him or her carefully, as that can go a long way in allowing you to understand the complexities of the investment world. Remember, the unwillingness to listen can make it difficult for you to adapt to the ever-changing investment and economic environment.
 

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