Golden Investing Rules
Any time is GOOD time to INVEST
There is a myth amongst investors on one need to ‘time’ the market as far as Equity investments are concerned.
Belief amongst some of the investors is they may lose capital if invested at wrong time.
The Truth is stock market is always volatile and there is no particular time to invest if one is investing for long term basis.
It is not when but if you invest that counts more.
- Start EARLY and let the time and power of COMPOUNDING work for you
Always investors who start early will have an advantage over investors who start later and may even invest higher amounts.
In the example mentioned herewith even though Mahesh has invested more amount, since he has started at a later age his corpus is much lower than Suresh who has invested smaller amounts at an early age.
We stand a better chance of achieving our financial goals by starting as early as possible.
- LONG term pays
Investors who invest for the long term, do not have to bother about daily or weekly market movements.
The returns do get averaged out over a period of time even if they significantly increase or decrease over short term.
Most important thing is to move the portfolio to debt funds -1 year prior to the requirement of corpus to avoid volatility in returns.
If you stay invested for a period of 5 years, the probability of earning positive returns increases to 99.99%
- Invest Regularly to beat the MARKET VOLATILITY
Regular investment helps in disciplining one’s investment habits. It also ensures that investor can keep contributing smaller amounts in more frequent manner rather than a lumpsum amount.
This allows investor to align his investments to his budget and income.
- Diversification helps REDUCE the RISK
‘Don’t put all your eggs in one basket’ is a well-known proverb.
Needless to say, Investors should diversify investments in different asset classes like equity, Debt, Alternate investments, gold etc.
Asset Allocation helps maximizing wealth by investing in different asset classes to capitalize on their unique risk, reward and liquidity attributes.
Performance of all asset classes does not move in same direction in any economic situation and hence diversification helps in mitigating risk.
- Choose Asset class according to financial GOALS
An Investor may have different goals like home purchase, child education, retirement etc.
An Investor’s financial objectives, time horizon and risk appetite play a role in deciding the suitable asset allocation mixes for one’s portfolio.
- Rebalance your portfolio
Rebalancing at a predefined frequency reduced the risk of having a skewed portfolio because of appreciation in value of portfolio in select classes and helps you to maintain target asset allocation.
