1. In reality, equity MFs are a 5-yr+ long-term risk-taking market-linked investment, and not simple and straightforward with protection.
2. Having said that, our obsession with capital protection is harmful for wealth, as it is not possible to put our money to use and protect it as well, and investment returns can come only when it is made to work.
3. If we can take risks in purchase of other movable and immovable assets, we can have a similar approach to our investments too, instead of seeking protection at all times.
4. Any asset-building activity cannot be done without taking risks, and future performance of financial assets is an unknown variable for all investors, with even best-managed businesses and well-thought out strategies misfiring.
4. Instead, we can just concentrate on avoiding risky mistakes like:
a) Having no asset allocation strategy, including emergency fund,
b) Overweighting on high-risk, non-diversified funds, and duplication in same categories,
c) Assuming short-term returns as long-term returns during goal-setting,
d) Funds not matching our risk profile or appetite, and
e) Investing beyond our net surplus.
5. We can reasonably safeguard ourselves better against global volatility (FIIs, trade wars, etc.) or national volatility (currency, oil price, inflation, etc.), for multiple ever-changing reasons beyond our control, by:
a) Being real about our job and income,
b) Rechecking our insurance plans,
c) Repaying our debts and avoiding leverage,
d) Realigning our assets to our needs,
e) Protecting our core asset allocation and cutting out the froth,
f) Tightening our expense belt,
g) Providing a stable foundation to our finances by taking adequate medical and other insurance covers,
h) Creating a contingency reserve against unexpected events.
i) Staying the course on money allocated to original goals without getting swayed by market noise,
j) Reviewing, rebalancing and ensuring that our money is spread adequately across all asset classes, and
k) Maintaining a proper balance
between all investments to allow our portfolio to gain from any rebound tomorrow.
2. Having said that, our obsession with capital protection is harmful for wealth, as it is not possible to put our money to use and protect it as well, and investment returns can come only when it is made to work.
3. If we can take risks in purchase of other movable and immovable assets, we can have a similar approach to our investments too, instead of seeking protection at all times.
4. Any asset-building activity cannot be done without taking risks, and future performance of financial assets is an unknown variable for all investors, with even best-managed businesses and well-thought out strategies misfiring.
4. Instead, we can just concentrate on avoiding risky mistakes like:
a) Having no asset allocation strategy, including emergency fund,
b) Overweighting on high-risk, non-diversified funds, and duplication in same categories,
c) Assuming short-term returns as long-term returns during goal-setting,
d) Funds not matching our risk profile or appetite, and
e) Investing beyond our net surplus.
5. We can reasonably safeguard ourselves better against global volatility (FIIs, trade wars, etc.) or national volatility (currency, oil price, inflation, etc.), for multiple ever-changing reasons beyond our control, by:
a) Being real about our job and income,
b) Rechecking our insurance plans,
c) Repaying our debts and avoiding leverage,
d) Realigning our assets to our needs,
e) Protecting our core asset allocation and cutting out the froth,
f) Tightening our expense belt,
g) Providing a stable foundation to our finances by taking adequate medical and other insurance covers,
h) Creating a contingency reserve against unexpected events.
i) Staying the course on money allocated to original goals without getting swayed by market noise,
j) Reviewing, rebalancing and ensuring that our money is spread adequately across all asset classes, and
k) Maintaining a proper balance
between all investments to allow our portfolio to gain from any rebound tomorrow.