With the new year, come a host of new year resolutions. We have a recommendation for investors - in the year 2008, learn to be still. There is a need for investors to appreciate the importance of this seemingly simple, yet pertinent trait. So what does 'learn to be still' mean? Let's go back in time to understand this.
Over the last few years, investors in the mutual funds segment have been inundated by one trend after another. For example, everything from flexicap funds, close-ended funds, gold ETFs, global funds to infrastructure funds have enjoyed their share of limelight and the investor's kitty as well. Most investors feel compelled to react (read invest) to the noise around them.
Of course, it would be unfair to blame just the investors. Fund houses and mutual fund distributors do their bit as well and by all means do it well. The investor is led to believe that the latest trend i.e. current new fund offer is the next big investment opportunity and missing out on the same could spell doom. As a result, the investor succumbs to the noise and gets invested. This is just the kind of knee-jerk reaction that investors need to be wary of and avoid.
The key to successful investing is not blindly participating in every trend. On the contrary, it's about adhering to one's risk profile, having in place well-defined investment objectives and investment plans to achieve those objectives. There is a need for investors to appreciate the importance of pursuing their investment goals with single-minded dedication and blocking all the noise.
Does this mean that investors should be completely indifferent to what's happening in the markets and in the domain of investments? Not quite. That would be an extreme view. If the 'in trend' offering/NFO fits into the investor's portfolio and can help him achieve his financial goals, then he can consider investing therein, not otherwise. The investment avenue's aptness in the investor's portfolio is the key, not its availability or it being the season's flavour.
This brings us to a vital aspect of investing. All investments need to be part of a broader investment plan. Making investments in isolation makes little sense; such investments often fail to add value to the investor's portfolio. More often than not, investments of the 'in trend' variety fall in this category.
Also, let's not forget the importance of longevity while investing. The utility of investments made has to go beyond the immediate. For example, planning for retirement or providing for children's education are needs common to most investors; furthermore, they are long-term in nature. Investments made to provide for the same should be able to withstand the test of time. An investment that is in flavour at the moment might fizzle out in the future, leaving investors in an unenviable situation.
Another factor that will enable investors to 'be still' is the quality of advice they are exposed to. If the investment advisor/financial planner helps investors construct an investment portfolio that is equipped to deliver over the long-term, then being indifferent to market occurrences and noises is an easy task.
Going forward, investors are likely to find themselves in a scenario wherein they are faced with an increasing number of investment options. The choice between being still or participating in every trend could well be the difference between achieving one's financial goals or missing out. And making that choice certainly shouldn't be difficult.
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