2019 is here, and it’s the time to embrace a seemingly timeless trend: the New Year’s resolution. Every year millions of people pledge to do better at multiple fronts of their lives and money is one of them. If you are serious about improving your financial picture in the coming year, you should follow some rules and start saving through mutual funds. It’s not that it is the only investment instrument, there are many, but these investment plans have the capability to defeat inflation and provide high returns in the long run. So, here are 5 resolutions that every mutual fund investor should take to have a super-fit investment portfolio
1) Provide Enough Time to Your Capital to Grow
We always try to time the market and think that as the market rises, our capital will also increase, but this year just invest and stay invested over an intended time frame. This is applicable on both equity and debt mutual fund investments. Most of us invest in the mutual funds because we have no time to research overstocks and track our investments. So, if you are convinced enough to invest in the mutual fund schemes, then give them proper time to provide you with inflation-beating returns.
No matter if you invest through SIP or lumpsum mode, remember what matters is to give optimum time to the fund managers to let your capital grow. But if you try to time the market, you need to have deep pockets and enough time to spot the market movements.
2) Stop Following Returns, Chase Consistency
We have often seen the investors who look after the high returns as well as top performing funds of the year and invest in them. But now it is high time when you should stop following the funds who have given high returns in a year. Now, you should include such funds in your portfolio that have delivered consistent returns for at least 5 years rather than a chart-buster for a year and disappear in the next. This will affect your capital growth as well as make your portfolio volatile.
3) Stop Being Obsessed with Stars
If you are also following such funds which have more star ratings than that of others, then you might face a dilemma when these ratings change every quarter. Rating is a good tool to track the performance of a fund, but you should not forget that every fund cannot have relentless top-notch performance. There are a few blips, ups, and downs but what matters is the long-term capital appreciation. So, you should not disturb your investments from various noises and especially media that the fund is not providing enough returns. Also, all the firms have different rating criteria which might confuse you.
4) Set a Financial Goal
When we did not make any goal before and start to invest, it seems a wrong decision in the later date because you didn’t set a goal and time period. How will this affect your investments and capital?
Mutual funds are of various kinds which also include short-term funds that give you returns in 1 year and others that will show growth after 7-10 years. If you’ve invested in the latter and wanted to redeem it in a year, then it may result in the capital loss. Lack of a clear idea on when you will need your money back forces you to change your investment decisions every time and affect the growth of your capital.
5) Review Schemes and Portfolio
While we always claim to stay invested for a long-term, but there are times when one needs to re-balance the portfolio and there’s no better time than the year-end to examine the health of your portfolio. The short-term blips are not the reason for worrying, but if you are seeing that your fund is not even performing in the bull market despite proper asset allocation, then you should stop investing your further capital in the fund and ask your financial expert to let you know in which scheme or asset class to invest further.
You must try to follow these rules with discipline, and you will see a bloom in your portfolio. Last but not least, there is a famous saying that “Resolutions are meant to be broken,” but the financial resolutions are the one, which should never be broken and followed till achieved.