With the continuous changing investment landscape, It becomes quite confusing for the common investors as to how to choose various investment avenues.
Sometimes equity performs, sometimes debt and sometimes international funds or gold funds take the lead. Even within equity, there are funds with different market caps and styles which find the flavour from time to time. So, what is the solution? Should we always remain on our toes and keep shuffling the portfolio? No, that is neither practical nor recommended at all. Chasing trail returns of the funds is a sure shot recipe of mediocre performance.
So, what should we do?
The answer lies in going back to answer the basic questions as to why you have been investing in first place. Yes, answering “why” will take care of every “How” to design the portfolio.
Here are few important why questions worth asking for-
Why am I investing?- I am investing because I value my financial freedom.
Why should/shouldn’t I try to maximise investment return?- Uncontrolled speed is prone to risk. My values don’t allow me to risk my family’s financial interests. Judiciousness protects.
Why you need not follow others while designing your portfolio. Not even the investment masters?- I know my situation, I know my values hence I will design my own portfolio not imitate others.
Why you need (or don’t need) an investment advisor?- I love my primary job and want to devote my energy to that job instead of learning the intricacies of investments. Moreover my advisor should be the one who keeps my motivation for investments high.
Why are you/your advisor choosing certain funds and avoiding others?- I value sound fundamentals and consistency in performance rather than blindly chasing big returns.
These are some of the sample answers. I invite you to design your answers and they will act like your guiding light to design your portfolio.
Answering “why” largely answers most of what and how questions. Your portfolio gets more systematic and your savings more disciplined. Then, you don’t need to keep looking for market clues and tips and investment decisions become less cumbersome. All this results in your enjoyable and stress-free journey towards financial freedom.
Manoj Pandey
CFP
