Investment Challenges And How To Overcome Them

Investing in equities is a good way of getting good returns. But, like any other form of investment, having a basic understanding is crucial. Reading the T&Cs, keeping track, following basic terminologies is what will ensure your ROI is good. If you’re unsure about doing it yourself and prefer opting to have an expert do it for you, then an asset management professional will be the person to speak to. Aparna Karnik, SVP, DSP Investment Managers says, “India has a well-established asset management industry that has investment products tailored for investors’ needs.” They are tax-efficient, cost-efficient, transparent, easy-to-access and have good long-term performance records. They benefit from professional managers who manage both risk and return. There are two challenges that most investors face, according to Karnik and she explains what one should do in each case.

Too Much Choice

There are so many funds that most investors get confused about which to choose. It is important not to get swayed by tall claims of people who may not have proper credentials. Better go with a simple, diversified, broad-based, low-cost index fund where the index represents a diversified set of large, established companies that will grow wealth over time. 

 

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You can also choose a diversified equity fund from an established mutual fund with a long track record of performance. Both are fine. Many investors want to layer their core diversified equity fund with smaller allocations to mid and small-cap funds and international stocks that can help in better growth and diversification. For this more nuanced portfolio construction, it’s better to go to a professional investment advisor but don’t forget to check their credentials and understand their incentives. 

Timing The Investment

Many investors remember to invest only when they see equity markets reaching new highs. They ignore or avoid equities when equities are down. This behaviour is the opposite of what investors should actually be doing, which is buying low and selling high. So, the best way to avoid this trap is through disciplined SIPs (Systematic Investment Plans). In SIPs, there is no need to time and one avoids the dangers of investing in a herd mentality.

Also Read: Take The Right Steps Towards Financial Security