Take A ‘professional’ Approach To Investing

Mutual funds offer a wide variety of equity funds ranging from diversified to specialty funds, thus enabling investors with different risk profiles to choose the right ones and achieve their investment objectives. 

The popularity of systematic investment plan (SIP) is not only bringing discipline into investors’ savings and investment process but also spreading the equity cult through the length and breadth of the country. It is heartening to see equities gradually finding its rightful place in the investment universe of Indian investors and that too with a commitment to remain invested for the longer term. However, considering that volatility is a natural phenomenon in the stock market and that three different market segments i.e. Large-Caps, Mid-Caps and small caps have different potential with attendant risks, one must be careful while deciding the right medium and the mix to invest in it. 

To begin with, it makes sense to entrust the job of managing your money to professional fund managers, who not only have access to research but also have the capability to make rational decisions. Besides, investing in a mutual fund rather than directly in stocks has many other advantages. Apart from being a simple method of investing, it is much easier to track performance as you have to track only one price i.e. the NAV (net asset value) instead of several stock prices. No wonder, an increasing number of investors are making mutual funds an integral part of their portfolios and investing in a disciplined manner.

Mutual funds offer a wide variety of equity funds ranging from diversified to specialty funds, thus enabling investors with different risk profiles to choose the right ones and achieve their investment objectives. Even for aggressive and knowledgeable investors, there are plenty of options. For example, a sector fund can not only be a perfect substitute for buying a few stocks from a sector that one likes but also takes some of the risk out of taking concentrated bets. Of course, investing in mutual funds too can be a little tricky as there are a number of funds to choose from in each of the categories.

Besides, there are a few other aspects that every equity fund investor must know. Firstly, it is important to understand that different segments of the market perform differently at different times. As the tide shifts in favour of a particular segment, the performance of funds focusing on that segment improves dramatically. Secondly, you must hold a fund long enough to evaluate its performance i.e. at least one year or so. Don’t make the mistake of either holding on to funds for too long or exit in a hurry. 

In other words, if you make a wrong decision, there is always a risk of missing out on good rallies in the market or getting out too early, thus missing out on potential gains. Considering the number of aspects that you need to focus on even while investing in mutual funds, it is always advisable to take help of a professional, who will not only help you in choosing the right funds and in the right proportion but also try to keep emotions out of your investment process. Despite following a disciplined investment approach, one requires hand-holding during turbulent times to avoid making haphazard investment decisions. 

While it is true that investing on your own will be cheaper as compared to investing through a distributor or financial advisor, any abrupt decision like abandoning your asset allocation and making frequent changes in the composition of your portfolio can cost you dearly in the long run. Therefore, if you are not confident of managing the portfolio on your own, don’t allow the cost alone to be the deciding factor. In any case, there is no ‘free lunch’ in investing. As is evident, a combination of allowing professional fund managers to manage your money and seeking guidance while doing so can do wonders to your financial future.