So, if you are investing in equity funds through SIP, you save a part of your income every month, avoid timing the market, benefit from averaging and if you stay committed to your time horizon, you also benefit from the true potential of equity as an asset class and the power of compounding. However, to benefit from this disciplined and potentially rewarding approach, you must follow the right investment process. A random approach can either expose you to unwarranted risks or disappoint you in terms of returns.
Remember, you won’t achieve your investment goals by following a haphazard approach of investing a random amount that is either not enough to achieve your goals or exceeds your capacity to invest, thereby compelling you to interrupt your investment process. Ignoring your asset allocation while selecting funds will make your portfolio either very aggressive or very conservative. Investing in too many funds, continuing with the same amount of investment despite rise in your income over the years and not tracking the performance of funds thinking that over time all funds do very well are some of the other pitfalls that can impact the final result.
This story is from the March 30, 2020 edition of Dalal Street Investment Journal.
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This story is from the March 30, 2020 edition of Dalal Street Investment Journal.
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