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“Destiny is commonly believed to possess an element of human control that fate does not. We may be helpless against the inevitable trajectory of our fates, but our destinies can be moulded by the choices we make.”
Laurie G. Fisher
Have you ever been to a circus where many talented performers, musicians, and acrobats entertain you? But for an artist, it takes years of practice, concentration, determination, and hard work to master their performance. They have to follow certain traits and training exercises to reach the end goal of entertaining you to the fullest. Acrobats need to work on their stamina; dancers need to work on their moves; magicians need to enhance their tricks behind the curtain; and the list goes on.
But success doesn’t come to those who wait; you need to apply certain parameters, methods, or approaches to succeed, and the world of mutual funds is no different.
Investors can apply five key practices to maximise their mutual fund investments
1. Create a goal and invest accordingly
An artist plans their performance according to the target audience. There are different sets of audiences for every act. Successful investors begin their investment endeavours with specific objectives in mind, such as child education, marriage, personal retirement planning, etc. The creation of goals at the outset of an investment helps to determine how much money must be allocated to which types of funds in order to achieve the investment objective with the least amount of risk, tax, and exit burden implications.
2. Periodic review
A comedian was expecting that the audience would burst into laughter after his joke, but to his surprise, no one in the audience even smiled. But he came up with a follow-up line, and the audience burst into laughter. You, as an investor, need to keep track of which investments perform better and which are consistent performers. There may be changes in tax or changes in investment objectives; you might want to track your portfolio. An investor might do well to monitor his debt investments quarterly and his equity investments annually.
3. Patience
It takes time to be a master acrobat; they develop new skills with time and patience. An amateur artist cannot expect to get it perfect in a day or two. He can fail while attempting a new trick, but with patience, he could learn the art. Successful investors maintain their patience and allow the volatility phase to pass. Over time, the law of averages catches up, and the funds deliver the anticipated returns.
4. Comparison
You cannot compare a magician with a ringmaster. Both have certain strengths and different goals for entertaining the audience. Such is the case with mutual funds; they are suitable to serve financial requirements. For recurring expenses, mutual funds can also be redeemed in parts. On the other hand, real estate and gold provide the psychological comfort of owning wealth but are seldom used to fulfil financial needs.
5. Trust your financial advisor
A dancer needs to trust his trainer while learning the new moves, or he can be injured. Which emotion he needs to put on which step, either he needs to take a pause or carry on with the performance. A trustworthy financial advisor plays a key role in managing the client’s investments as per his goals, suggests corrective action if any special situation arises, guides the client when things are not progressing as expected, and inculcates financial prudence in clients on other money matters like loans.
Conclusion
Mutual fund investing is about discipline, patience, and simplicity. Investors would do well to give the above practices some thought and make them part of their personal investment process.
