Be Sure Of Your Investment Process

If you are looking to secure your financial future, make sure to follow a smart investment strategy. To achieve this, you will need to demonstrate patience, perseverance, and commitment through your defined time horizon. That is because you will face several challenges between the time you begin investing and when you achieve your investment goals. Another important factor is to have a plan in place to keep your portfolio on track through your defined time horizon. Here is how you can become a better investor:[EasyDNNnews:PaidContentStart]

Look at the bigger picture : You must think big at the start of your investment process. This will help you plan your investments well. Many investors are often found guilty of following a haphazard approach of investing in different asset classes. Then, there are those who abruptly exit from an asset class like equity during periods of market volatility. Needless to say, this approach often makes them miss out on big opportunities in the market. Therefore, you must look at the bigger picture and establish the goals to be achieved over short, medium, and long-term horizons. A goal-based investment process ensures that you follow budgeting, give risk management its due, and follow an asset allocation model that helps in creating the right balance between risk and reward.

Remain committed to your time horizon : Once a time horizon is assigned to a goal, you must remain committed to it. This approach prepares you to tackle the volatility without having to worry about its impact on the portfolio in the short to medium term. Besides, if you continue your investment process uninterruptedly, you benefit from averaging.

Make conscious efforts to educate yourself : Today, a lot of information is available for you on various investment options and strategies to invest in them through different mediums. Hence, you must be open to absorb this knowledge and use it in your investment process. If you find it overwhelming to analyse this information, do not hesitate to take the help of an advisor or Mutual Fund distributor.

Remember, the unwillingness to learn can make it difficult for you to adapt to the ever-changing investment strategies and market scenarios.

Understand the impact of lack of diversification and/or over-diversification : While diversification is the key to curb volatility in the portfolio, lack of diversification and/or over-diversification in the portfolio can expose you to higher risk. It is true that a concentrated portfolio has the potential to generate higher returns; however, the losses could be higher too. Therefore, if it is a conscious decision to either build a concentrated portfolio or invest in a focused fund, short-term losses should be ignored.

Similarly, over-diversification in the portfolio allows nonperforming investment options to remain in the portfolio and that can make a dent in your portfolio return. Therefore, make efforts to avoid over-diversification and monitor the progress of the portfolio regularly to weed out non-performers from the portfolio.

Do not ignore the opportunity losses : Opportunity loss is the value or potential gains that you miss out by choosing a specific type of asset class, investment option, or strategy. Remember, frequent instances of opportunity losses can make a significant impact on what you get to accumulate over time. Therefore, monitor your portfolio regularly and be aware of opportunities that can help you improve your portfolio returns. Of course, making frequent changes can become counterproductive.

Follow a flexible approach : It is proven that there is no straight path to investment success. Hence, your investment process as well as options must provide you the flexibility required to realign your portfolio in line with your changing circumstances as well as economic and political environment. Besides, you may have to contend with the challenges in the form of volatility and non-performance of some of the investments in your portfolio. Mutual funds, as an investment option, provide you the right level of flexibility.

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