A young regular earner should overcome his fear of investing in Mutual Funds as they are helpful in meeting all financial goals which he may have lined up in his life's journey.
1. We can shift from being a perennially loss-averse saver to an optimistic long-term MF investor if we learn the art of managing our risks while building our wealth.
2. It can begin with a simple, well-diversified asset allocation to ensure that any impacts - even indirect incidents - do not dent your entire portfolio significantly.
3. We should never believe that risk-free investments exist, as historical data for all asset classes clearly establishes that risks exist in all of them.
4. We should also stop trying to predict the future asset prices ourselves, nor insist from others to do so for us, while constructing our portfolio, and ensure that we hold a combination of funds as per our own risk appetite.
5. We should never keep searching for the next best thing to bet on, and focus on managing risks in our own portfolio.
6. We should have a clearly laid out corrective action plan when a risk occurs, by setting our own risk tolerance level beyond which it hurts our portfolio returns.
7. While determining our investment risk appetite, we should be clear about our income & financial stability, retirement & dependents, loans & liabilities, needs & savings, and our short-term, medium-term & long-term goals.
8. This will greatly help in our choice of MFs, which will then become based on whether we are a conservative, moderate or an aggressive investor.
9. We can understand risks in MF investing if we are able to remove the risk that is avoidable, otherwise we will always run back to the need for capital protection, however unrealistic it may actually be.
10. It is not only a theory but an investing reality that there is no return without risk, and our obsession with capital protection is harmful for wealth, as it is not possible to put the money to use and protect it as well.
At the end of the day, overcoming any fear is in your hands, being a very personal subject.
1. We can shift from being a perennially loss-averse saver to an optimistic long-term MF investor if we learn the art of managing our risks while building our wealth.
2. It can begin with a simple, well-diversified asset allocation to ensure that any impacts - even indirect incidents - do not dent your entire portfolio significantly.
3. We should never believe that risk-free investments exist, as historical data for all asset classes clearly establishes that risks exist in all of them.
4. We should also stop trying to predict the future asset prices ourselves, nor insist from others to do so for us, while constructing our portfolio, and ensure that we hold a combination of funds as per our own risk appetite.
5. We should never keep searching for the next best thing to bet on, and focus on managing risks in our own portfolio.
6. We should have a clearly laid out corrective action plan when a risk occurs, by setting our own risk tolerance level beyond which it hurts our portfolio returns.
7. While determining our investment risk appetite, we should be clear about our income & financial stability, retirement & dependents, loans & liabilities, needs & savings, and our short-term, medium-term & long-term goals.
8. This will greatly help in our choice of MFs, which will then become based on whether we are a conservative, moderate or an aggressive investor.
9. We can understand risks in MF investing if we are able to remove the risk that is avoidable, otherwise we will always run back to the need for capital protection, however unrealistic it may actually be.
10. It is not only a theory but an investing reality that there is no return without risk, and our obsession with capital protection is harmful for wealth, as it is not possible to put the money to use and protect it as well.
At the end of the day, overcoming any fear is in your hands, being a very personal subject.