Take Stock of Your Investment Strategy Now Hemant Rustagi Chief Executive Officer, Wiseinvest Pvt Ltd.

All of us aspire to build wealth in a manner that there is enough money to achieve goals like children’s education and marriage, buying a house, going for a vacation, and having a comfortable retired life. Considering that some of these goals require us to build a large corpus, it can be quite challenging if investments are made in an unplanned manner. While some investors get overwhelmed by the thought of having to accumulate a large corpus for these goals, there are those who do not even start the process of investing for different reasons. [EasyDNNnews:PaidContentStart]

No wonder, they struggle to garner enough resources to achieve these important goals. If you are an investor who began investing without having an investment plan in place, it is time to establish your investment strategy and realign your investments to get the best out of them. For those who have not yet started investing, the focus should be on initiating your investment process at the earliest to benefit from the ‘power of compounding’. Power of compounding, described by Albert Einstein as the eighth wonder of the world, helps you to accumulate a large corpus when you allow your money to grow over time. 

It is quite common to see investors facing a few dilemmas when it comes to deciding how to go about investing in an asset class like equity. If you have been facing similar dilemmas, you can untangle them by following a disciplined investment approach. No wonder, millions of investors in our country have been enrolling for SIP. They are realising that this wonderful approach of investing a fixed amount every month is helping them in removing emotions from their decision-making process. 

That is why, despite the stock market being flat for the last one year or so, the SIP book has continued to grow during this period. While these growing SIP numbers are quite encouraging, there is still a section of investors who need to relook at their strategy of investing without a defined time horizon and bringing their investment process to a halt every now and then. Remember, too much of experimentation and adhocism can spell disaster for your financial future. 

Here is how you can get the best results from your investments: Follow budgeting: Many investors, especially those who start investing late, often make the mistake of committing a large amount for investing through SIP. As a result, they find it difficult to continue the process after some time. Unfortunately, rather than reducing the amount of SIP, they stop the process itself. Therefore, you must start conservatively and gradually increase the amount to ensure continuity. Budgeting can go a long way in ensuring your investment process continues uninterruptedly. 

Define your time horizon: You must avoid enrolling for SIP for random periods. The right way would be to invest with a time commitment that is aligned to your long-term goals. Remember, the longer you follow this process, the more you benefit from ‘averaging’ and ‘power of compounding’. 

Understand the risks associated with an asset class: Many investors have the misconception that they cannot lose money if they invest through SIP even while investing in Equity Funds. The truth, however, is that a disciplined approach only mitigates the risk of volatility and does not eliminate it completely. However, the impact of volatility gets minimised to a great extent if you continue the process for a longer time period. 

Step-up your SIP: While the objective of investing through SIP is to turn volatility in the stock markets to your advantage, this disciplined approach also allows you to save and invest regularly. It is important to maintain this discipline not only at the start of your investment process but also through your entire investment process. Therefore, make sure to increase your SIP amount every year so that a part of the increase in your income gets allocated to your investments. This will help you accumulate a much larger corpus over time. 

Choose the right funds: While asset allocation helps you diversify your portfolio across different asset classes in line with your time horizon and risk profile, it is equally important to choose those funds that have the potential to help you benefit from the true potential of the chosen asset classes. Look to invest in funds that have a well-established and consistent performance track record. Until you gain experience as an investor, your focus should be investing in well-diversified categories of funds. 

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