Investment Rule: Investors should begin to invest once they find a way to start without losing money. Until they find the asset allocation right it may not happen. One of the lesser known facts is that Equity is not that risky as the time that you give for investment.
The time that you give for your investment is the risk in your portfolio. If you invest in bond or Debt fund with an outlook of 3 months to 6 months it can become riskier. Similarly, if you consider investing in the balanced fund for just 1 year instead of low duration debt fund it can become riskier. Equity funds can be risky to invest for less than 5 years. This brings the important question what is Investment risk?
Make the right comparison
Risk is different for different people. So one shoe fits all will not work. So what is an easy risk for one investor cannot be the same for others. So don’t make peer comparison and start investing. The way to find what suits me is the biggest fact finder for investors. It is strongly suggested that you find an able advisor whose presence can make a difference. So get your picture perfect allocation so that you don’t lose money. If you don’t stay for an optimum period of time in a particular asset class in Equity then you stand a high chance of losing money
Validate your investment rule
- For data congruency, check AMC website for details on performance, expense ratio, etc
- Leverage 3-4 times the maturity by investing in long term debt if you are equity averse
- Start from safe avenues and then grow the equity risk in the portfolio
- Stagger your investment over a period of time
Excuses such as “I don’t have time”, “work pressure”, “I go with what he says” and hence giving very less attention to investment kills the portfolio yield and it may get stuck in the underperforming asset class. Ultimately it is your money and you need to take utmost care. Nobody else other than you can be more worried about its safety or yield. Also please remember that your investible money is worth 150% of what you think because you have paid tax on it.
To illustrate, if you earn 30k you end up paying 10k tax and the investible amount is 20k. So please remember for every 10,000 you invest it is equal to 15,000 of your earnings (pre-tax). So money is 150% precious than what you think.
The first rule of investing -Don’t lose money and don’t lose focus