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| Pic credits: Bcci.tv |
Virat Kohli has been one of the finest craftsmen the game has
been blessed with, the finest?
Well that’s a debate we do not want to get into, for the time
being though let’s try and analyze how his approach towards the game is
something we can all inculcate in our very own outlook towards investing in
Mutual Funds.
"In
general, we keep looking for goals in life. Generally as human beings we look
to achieve something in work, be it any profession. Do something which is in my
control mentally"
Goals: Wanting to be rich is not a goal, it’s a generalized desire most, if not all of us aspire. You are more likely to day dream when you have a dream rather than when you have a goal.
Goals: Wanting to be rich is not a goal, it’s a generalized desire most, if not all of us aspire. You are more likely to day dream when you have a dream rather than when you have a goal.
On the other hand when you have a goal you are most likely to
have a plan and take steps towards that goal. Goals have to be personalized and
not generalized.
It also helps you stick it out when the going gets tough.
Knowing why you started will be your biggest strength when you ponder over
abandoning your goals midway.
Let’s say you are investing towards your child’s higher
education abroad and have a 10 year horizon for the same. You do not abandon
the same in case your child falters in one exam but in case the markets are
seething for a year then the thought of halting the investing process does
cross your mind.
This is when having a goal helps, you had a 10 year time
horizon so then why would go astray say within the 3rd or 4th
year itself just because the markets have seen a blip?
When you have a goal, you know where you are headed and why.
If you can wait for
your child to grow then why can you not wait for the very Mutual Funds to grow
too that were planned for his future benefits?
Control: It’s our
innate nature to worry about things we cannot control and yet that serves no
purpose. You cannot control how the market behaves but you can always control
your behavior towards it.
Note how the word mentioned here is ‘’behaves’’ and not ‘’reacts’’.
You have to be proactive and not reactive in order to avoid self-sabotage.
What you can control
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Your greed
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Your behaviour
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How much you can invest
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How long you can stay invested etc
|
What you cannot control
|
Returns
|
Change in Fund Manager
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Change in Fund Strategy
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Market Behaviour
|
And yet returns is what we are obsessed with even though it
is beyond our control. This is not to say returns do not matter but when you
focus on things that are within your grasp, you tend to worry less about the
things that are not within your control. There are no guarantees in life and
investing in Mutual Funds is no different but when you focus on the
fundamentals the results tend to take care of themselves.
‘’I usually
target to finish it 2-3 overs before. That is the way I plan my innings.’’
Time Horizon
Investors
with long term goals often make this rookie yet common mistake. If you have a
goal that requires 12 years to accomplish it then you need to plan to stay
invested for 10 years and not 12, let’s try and understand this further in
detail.
Now
let’s say you indeed had a 12 year time horizon and needed the same corpus in
the 12th year, now in the very 12th year the markets see
a correction and your investments take a hit. The thing though is, you had
planned your Mutual Funds investment and time horizon in such a way that
delaying the redemption amount is not feasible for you so therefore you have no
option than to redeem your investments at a low.
Now in
case you had planned for 10 years and the very year the markets see a tumble,
you can still stay invested for another 2 years since the corpus would be
needed in the 12th year so therefore you still have another 2 years
as grace period during which you can redeem as and when the markets are in the
green.
When it
comes to investing in Mutual Funds, be a Kohli and not a Dhoni, finish it off
2-3 years before you need to.
There’s no need to take it till the last over,
bravado has a heavy price to pay when it comes to investing in Mutual Funds.
‘’
You just can't go in one mode. I think it is a balance of being
aggressive."
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| Pic credits: abc.net.au |
Believe in yourself but there’s no harm in taking precaution,
hope for the best but prepare for the worst. Yes it sounds boring and old
school but it gets the work done so there’s no need to reinvent the wheel.
It’s one thing to be confident in yourself, it’s another to
be over confident.
The market does not take kindly to ego and pride so it would
be advisable to leave those at the door.
The market rewards what you deserve and not what you desire.
You cannot randomly declare yourself to be an aggressive
investor, your risk assessment can do that. Remember risk appetite and risk
tolerance are not the same thing.
Risk appetite signifies how much you can invest whereas risk
tolerance signifies how much of a hit can you tolerate and still not panic,the
stock market is a place where your EQ is more valuable than your IQ.
You need to strike a balance between aggression and caution,
you cannot test the waters with both feet. Often novice investors in the past
have put their entire life savings into Mutual Funds on the basis of some hot
tip and have lost dearly. You need to set aside your emergency corpus and also
account for daily and monthly expenses among other various other important
things.
You would also need to look at possible negative scenario
that may arise in the future, say a sudden job loss and also cater to your debt
needs. You cannot be completely invested in equities, if you cannot imagine a
scenario where you see yourself invested for a minimum period of 5 years then
mutual funds are not for you.
‘’If
you want to be consistent, you need to be boring with your training, your food
and your batting habits.’’
Habit: You cannot
one fine morning decide to run a marathon. You would have to practice for days
and at times even months in advance. You would need to make sure you build up
endurance over a period of time to give your body the best possible chance not
to break down.
The issue with habits in any walk of life is that they can be
extremely boring, that can be very challenging to endure in a very fast moving
life.
Social media does not help either where every alternate day
you come across headlines like
‘’Best Schemes
to invest”
‘’This scheme
gave the highest returns’’ and so on
Make sure you
keep one thing in mind when you scroll on social media and come across various
success stories of wealth generation:
No one is rushing to post their failures
With Mutual Funds you have to be ready to be boring and
imbibe the same old but proven principles of discipline, patience, avoiding
noise and so on.
The itch to tamper with your portfolio will always be high,
it will be the highest when the markets are down.
If you cannot continue your SIP’s in Mutual Funds for a
minimum of 5 years and stay longer than that then Mutual Funds are unfortunately
not for you.
There’s no shame in accepting and staying out, it is any day
better than losing your hard earned money over your pride.
‘’
I felt like I could hit every ball of the first over from Tim Southee for a
six. But I stopped myself because I don’t want to disrespect the sport.’’
As previously
mentioned, investing in Equity Funds means staying true to certain principles like
a) Patience
b) Discipline
c) Avoiding
outside noise and so on
At times though, we have seen far too many investors trying
to reinvent the wheel and experimenting with their hard earned money.
Learn the rules before playing the game and when you do, respect them
The greatest of them all, irrespective of what field they
belong have strong attachment to principles and ethos.
You cannot expect money to pay you back if you do not respect
it.
You do not need to emulate exactly what another successful
does, in fact that can prove counter- productive. We all have varying
situations but there’s absolutely no shame in learning from others though.
Got some questions ? We've got the answers,
email us at info@themutualfundguide.com
Disclaimer : While due precaution has been undertaken in the preparation of this article, The Mutual Fund Guide or any of its authors will not be held liable for any investments based on the above article. The above article should not be considered financial advice and has been published only for your perusal. Due credit has been given in case wherever required, in case you feel any part violates any rights then do get in touch with us and we shall get it duly removed.
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