Irrational decisions can get accentuated when markets too act quirky. As your advisors we observed that many of you, especially those who entered mutual funds in the past 18 months, reacted to the market moods in ways that can only cause more harm to your portfolio than do any good.
In this article we list some of your top investment behaviours in 2017 that you should avoid in 2018.
Chasing the toppers
Many of you wanted to increase allocation to ‘top performing’ funds in your portfolio. This is not a good idea. Why? First, a certain allocation has been made in these categories keeping in mind your goal, time frame and risk profile. By going overweight on the top performer, you are subjecting your portfolio to higher risk. Second, when a certain fund has delivered abnormally high returns, the possibility of it delivering such high returns diminishes. This is because the fund must once again performing a feat of finding maximum winner stocks. If this be the case, why should you go on a wild goose chase?
Abandoning an asset class
With equity deliver high returns and debt performing poorly, some of you wanted to shift entirely to equity. This is not a prudent act. This Is because, when debt falls, it becomes an under-valued asset class. But you wish to buy the relatively expensive asset class – equity, after it has delivered. You are doing exactly the opposite of – ‘buying low and selling high’. Debt is meant to provide some hedge to your portfolio when equity is volatile. You need to hold the funds for the time frame they were recommended for, unless the fund itself is a poor performer.
Forgetting your time frame
When you choose a long-term fund, you agree you can stay invested for the long term. The moment you see near-term volatility, you want to exit saying you cannot wait for the fund to outperform. This was true of debt funds in 2017, when a dip in their returns caused you to become short-term investors from long-term holders. What happens? You often book losses, incur exit loads or sometimes avoidable short-term capital gains. When a fund is given to you, it is suggested only based on your time frame. Changing your time frame, based on near-term performance is a poor strategy.
Avoid these errors in 2018 and you will be in safe territory for the coming year. Happy new year and happy investing!
- Merger of Navi Overnight Fund into Navi Liquid Fund and Navi Conservative Hybrid Fund into Navi Aggressive Hybrid Fund
- Intimation of suspension of subscription in Bandhan US Equity Fund of Fund
Winning Funds, Losing Streaks: Decoding the Mystery of Short-Term Underperformance
Wealth Conversations – November 2024- Notice of Change in Fundamental Attributes of DSP Equity & Bond Fund and DSP Quant Fund
My mom is 52 years old. She gets Rs.15 K/month from her MIS & her total interest income from Bank FD s is b/w Rs. 3 – 3.5 lakh. She gave me some pocket money from which I am investing in mutual funds for last 2 years as self DIY. At first we invested in mutual funds to save tax but now we are investing in it to get higher returns than bank FDs. Till to date we have invested Rs. 65 K in SBI bluechip & Rs. 95 K in SBI Magnum balanced fund. Since last year we started two SIPs of Rs. 1 K each in bluechip & magnum balanced fund. Those SIPs will continue till 2021. Recently we started invested in Birla sunlife’s tax relief ’96 , small & midcap fund & pure value fund in lumpsum mode. We are planning to increase investment in birla’s ELSS. Are we in right direction ? Am I over diversified our portfolios ? Is it riskey to increse investment in birla’s pure value fund ? Our whole aim is wealth creation in long term perspective.
And lastly is it wise to invest in self diy mode ?
Abhinaba, We are constrained from taking individual portfolio queries in this forum. if you have a FundsIndia account please send your query through the platform. As for your investments, you should choose funds based on the time frame you are investing for. For example, if you are looking for substitutes for FD, you can consider debt funds. Unless your investing is really long term, equity may not be the option. Hence, first get your time frame and risk appetite clear and then choose funds. ON DIY, if you can spend the time in not just looking for the right funds but also building a right asset allocation, then you may consider DIY.
thanks, Vidya
My mom is 52 years old. She gets Rs.15 K/month from her MIS & her total interest income from Bank FD s is b/w Rs. 3 – 3.5 lakh. She gave me some pocket money from which I am investing in mutual funds for last 2 years as self DIY. At first we invested in mutual funds to save tax but now we are investing in it to get higher returns than bank FDs. Till to date we have invested Rs. 65 K in SBI bluechip & Rs. 95 K in SBI Magnum balanced fund. Since last year we started two SIPs of Rs. 1 K each in bluechip & magnum balanced fund. Those SIPs will continue till 2021. Recently we started invested in Birla sunlife’s tax relief ’96 , small & midcap fund & pure value fund in lumpsum mode. We are planning to increase investment in birla’s ELSS. Are we in right direction ? Am I over diversified our portfolios ? Is it riskey to increse investment in birla’s pure value fund ? Our whole aim is wealth creation in long term perspective.
And lastly is it wise to invest in self diy mode ?
Abhinaba, We are constrained from taking individual portfolio queries in this forum. if you have a FundsIndia account please send your query through the platform. As for your investments, you should choose funds based on the time frame you are investing for. For example, if you are looking for substitutes for FD, you can consider debt funds. Unless your investing is really long term, equity may not be the option. Hence, first get your time frame and risk appetite clear and then choose funds. ON DIY, if you can spend the time in not just looking for the right funds but also building a right asset allocation, then you may consider DIY.
thanks, Vidya
Hello Guys,
I hold both demat as well as trading account with FundsIndia. Just wanted to take a moment to appreciate the terrific job you guys are doing in keeping the platform up to date and bringing in more value through various other unique offerings both in the website and the through the smartphone app. One of the possibility that I am in the lookout for is the ability to invest in IPOs through this platform in future and also in ETFs. I am keen to invest in Bharat 22 ETF but looks like same cannot be done through this platform. Also I would appreciate gamification tutorials on how to invest in complex instruments like Derivatives and Options as it would help investors like us to get the game to the next level. Also a demystifying body of knowledge of how to make sense of P/E , P/C, P/B , EPS and other metrics and how to make sense of balance sheet and Financial statement of a company to pick winner stocks for the long time horizon of say 10 -15 years or even more would be greatly appreciated.
Thank You Guys & Regards,
Arnab Bhattacharya
Hello Guys,
I hold both demat as well as trading account with FundsIndia. Just wanted to take a moment to appreciate the terrific job you guys are doing in keeping the platform up to date and bringing in more value through various other unique offerings both in the website and the through the smartphone app. One of the possibility that I am in the lookout for is the ability to invest in IPOs through this platform in future and also in ETFs. I am keen to invest in Bharat 22 ETF but looks like same cannot be done through this platform. Also I would appreciate gamification tutorials on how to invest in complex instruments like Derivatives and Options as it would help investors like us to get the game to the next level. Also a demystifying body of knowledge of how to make sense of P/E , P/C, P/B , EPS and other metrics and how to make sense of balance sheet and Financial statement of a company to pick winner stocks for the long time horizon of say 10 -15 years or even more would be greatly appreciated.
Thank You Guys & Regards,
Arnab Bhattacharya