Hello Readers!
Human actions are reflex of their emotion and when it comes to investing, your emotions and resultant action becomes more detrimental which ultimately affects your financial health. It is advised to investors to always take their emotions and their investing as two different aspects whether in stock market in mutual fund or any other investing instrument.
Getting anxious after seeing the negative or low returns is natural but, your anxiety should never end in panic selling, or switching of funds or any other decision that becomes harmful for your returns and your goals. Investors have to try consciously to avoid a cloud of emotion in financial decision making.
However, there are many investors, who have their own strategies to maintain a distance between their emotion and their investment, but here we are discussing some measures that you can opt and can separate your emotions from your financial decision making.
ASSET ALLOCATION PLAYS THE KEY ROLE
Asset allocation is a practice or process through which you divide your investments across various instruments like debts funds, equity funds, and other funds that suits your financial goals and your risk profile. It plays the key role in keeping your emotions away from your investment, only your asset allocation requires a strategic planning.
Once asset allocation is done it doesn’t need to be changed for a few years, it requires modifications only in situations of change like expansion of family or addition of large goals like buying a house, getting close to retirement and some other.
Fixed asset allocation in your investment acts as a guide that helps you manage risk during the steep market and get prepared for times of distress.
AUTOMATE INVESTING
Automatic and regular investments are the second strategy that helps you maintain a distance between your emotions and investment, and in this scene, SIP (Systematic Investment Plan) plays the best role.
Systematic investment plans automate your investment payout directly from your bank account on frequency of your choice whether monthly or quarterly or yearly. Pick a time frame that is most suitable for reaching your financial goal and continue you SIP till that time frame.
Do visit your investment on intervals and make changes in your SIP like increasing your SIP amount in case your income increases or the underlying fund or security changes, this strategy will help you build a good corpus.
AVOID FREQUENT PORTFOLIO VISITS
Checking your portfolio, and analyzing it, is helpful as it helps you maintain a good asset allocation, but at the same time checking your portfolio too often, can drive your emotions towards your investment that may ultimately result in panic selling.
It is advisable to investors; check your portfolio, but not too often. Visit your portfolio only during sharp shifts in the market, or when your income status changes or if the state of the securities you invest in change and lastly, if you have reached one or more financial goal you set-out for.
Frequently looking at the portfolio value can force you take adverse decision for your long term investment especially when it is showing short term volatilities. In most situations, the long-term portion of your portfolio should remain untouched despite market volatility.
Investment return is based upon both the strategies of fund manager and more on the behavior of investor’s emotion towards investment, thus it is advised to investors, be objective, less emotional when it comes to investment and invest wisely.
You can contact us at Shri Ashutosh Securities Pvt Ltd., for any assistance, we are here to help you in any way possible.
Happy Investing!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).