Weathering market storms: 7 proven strategies for investment success
retirement goals and how one is doing against the budget or plan set out for each of these items is a good place to be in. It requires discipline, consistency and ongoing calibration. Depending upon surplus income, time horizon, liquidity requirement, risk & reward appetite, one can choose to be in either traditional investment options (like bank accounts, deposits, bonds, etc) or in mature products (like mutual funds, stocks, ULIPs, PMS, REITs, etc) or any combination from the above.
Most investment options have inherent risks that one signs up to while buying that product. Example: Bank deposits are subject to interest rate and reinvestment risks. Bonds are subject to both and default risk, stocks and mutual funds are subject to market, liquidity and unsystematic risks.
Over and above, investments are subject to systematic risks which need to be managed through portfolio diversification and other strategies. The more time one spends in understanding the life cycle and behaviour of one’s investments over a period of time, the more equipped one is with effective planning towards weathering a potential or a real storm, as and when. Some smart and proactive risk management workarounds for one’s portfolio are: Diversification - Spread investment portfolio among a variety of investments (subpar returns or losses in some may be offset by others with average returns or gains).
Asset allocation - Distribute portfolio across major categories of investments such as stocks, bonds, cash, gold, REITs.
Low cost investments - Invest where cost of investment is low such as Index Funds, ETFs.
Investment strategy - Active vs passive investing, value vs growth investing, income vs gains oriented investing.
