Be Decisive While Investing Your Money

The ever-expanding investment universe is allowing investors in our country, with varied risk profiles and time horizons, to invest in a wide variety of investment options. However, to benefit from these in a consistent manner, the key is to choose the right options and in proportions that suit their needs. 

There are a number of factors that may impact the final outcome of your investment process over different time periods. For example, portfolio returns may get impacted based on when and how you invest, as well as how soon or late you start investing. While some investors fail to accumulate the required corpus for their long-term goals due to delays in starting their investment process, there are others who suffer since they rely on traditional investment options like FDs, small savings schemes and other pure debt instruments for their long-term goals, such as children’s education and retirement planning. 

There are also those who do not put in adequate effort while investing their money. Simply put, while they work hard to earn, they do not show the same intensity and seriousness when investing their money. Investors must realise that investing is a process that requires planning, perseverance and time commitment. If you follow this process, you can not only avoid making haphazard investment decisions but also ensure that you have adequate financial resources for each of your investment goals. 

As is evident, it pays to be decisive while investing your hard-earned money. Here is how you can keep your investments on track through your defined time horizon. 

Take the right first step — Do not begin investing without doing some groundwork. There are three steps that can help determine an action plan. First, you must begin by making a list of personal and financial goals with short-, medium- and long-term horizons. For example, in the short term, you may want to buy a car; in the medium term, you may like to provide for children’s education; and in the long run, retirement funding could be an objective. 

Second, you need to assess your current position in the financial lifecycle. Third, you must decide how much risk you are willing to take to earn your targeted returns, as well as what your capacity is to take these risks. This is critical, as different financial objectives require different investment mixes. 

Balance risks and rewards — Many of us make the mistake of underestimating risk and/or overestimating reward from an investment. Remember, both of these can cause disappointment, which may lead to some haphazard decision making. That is why you need to be careful about this aspect of investing. By estimating the risks associated with each investment option, you can improve your chances of building greater wealth. 

Keep focus on your asset allocation — There are instances when investors show complete disregard for their asset allocation. Obviously, in their quest to maximise returns, the risks associated with portfolio imbalance are totally ignored. Remember, shifting focus to short-term goals at the cost of your long-term goals can expose you to serious financial risks. If it becomes necessary to do so, try to explore other possibilities rather than abandoning your long-term investment plan in a hurry. 

Keep emotions away from your investment decisions — Investors are often guilty of allowing their emotions to drive their investment decisions. As a result, they stay away from potentially the best asset classes, such as equity, during market downturns and end up investing aggressively during rising markets. While they suffer because of wrong decisions, they suffer even more because they refuse to make changes, as that could mean booking a loss. In reality, if you take corrective action, you can not only correct the mistake but also get an opportunity to bring your investment process back on track.