INVESTMENT REFLECTIONS - DSCFINANCIALS
*Abhimanyu knew only half the technique - of entering into a Chakravyuha : Are we doing the same while investing*
During the last few days, when I see and hear on TV, Experts replying to queries of investor and suggesting equity mutual funds, time and again, I am reminded of the Mahabharata character Abhimanyu.
Abhimanyu knew how to enter Chakravyuha, but did not know how to come out of it and for which he had to pay a heavy price.
For example, yesterday in one of the TV programmes a new investor raised a query regarding what investment he should make for accumulation of a particular corpus for a goal which was 8 years away. The expert’s reply was that as 8 year is a long term investment, he can start investing in a large cap and a multicap fund and few names were suggested.
A few questions which need to be pondered on this recommendation given on TV programme are :
What is the risk profile of the investor and is the suggested investment compatible with his profile.
Does the investor realise that the long term goal will become a medium term goal is about 3 yrs and a short term goals in about 5-6 yrs and if he continues with his equity investment till the 8th year and if the market is volatile he will have problem in achieving his goal.
While the investor concentrates on returns, does he know the risks associated with investment instrument and the need to mitigate the risk when the proximity to his goal increases.
Does he know how to periodically review his portfolio to check whether he is on track for achieving his goal and do proper balancing between debt and equity not only at portfolio level but also at goal level.
While there is enough data to show that Equity Mutual Fund Investment creates wealth in long term and is essential in our portfolio to beat inflation, it is very important that we don’t give all our thoughts only to initial selection and entry in a scheme.
A proper portfolio balancing and an exit strategy is equally and in fact much more important, if we have to come out successfully out of the Chakravyuha.