How To Make Money In Equity Markets Bonds Mutual Funds

Asset allocation, which involves spreading investments across assets of equities, bonds, real estate and commodities, remains an alien concept among retail investors. Equities are seldom considered an asset class and often treated in a speculative form. Moreover, many investors try to time the market.

Often, the questions asked are: when is the right time to get in? Or, when should I exit certain counters and so on. But the most elementary way of managing wealth is ignored. So, first of all, investors should decide on their asset allocation. The percentage of exposure to equities and bonds should match the risk levels one is comfortable with. After deciding on the asset allocation mix, proper tracking of portfolio is needed.

For instance, investors should make changes in their asset allocation at every 10-20% change in intended allocations, based on convenience. So, if investors want to invest 40% in equities, but the composition has risen to 60% due to portfolio appreciation, they should sell sufficiently to bring back the equity composition to 40%. Soon, there will be good news for retail investors. The number of asset classes is set to multiply over the next one year. This means more choices for Indian investors in the near future, enabling better portfolio diversification. In the past, investors resorted to lesser diversification in real terms.

All the investments, were more or less of a similar nature, resulting in poor risk mitigation. For instance, 90% of new fund offers (NFOs) launched last year were ‘repackaged’ products. Investors invested in multiple equity fund schemes that mostly chased the same stocks. They could have invested in existing schemes to fulfill their investment requirements. But due to Sebi’s guidelines, the new rules of amortisation of initial issue expenses took the cream out of NFOs. Future schemes are expected to be valueadditive.

Mutual funds are coming out with capital guarantee products, real estate mutual funds and foreign equity funds with broader investment mandates than before. These are products that give real choices to investors. Another cardinal sin that investors commit is that of chasing 'returns'. Investments that generate the highest returns are not necessarily the best ones.

One needs to get out of the illusion that his or her investment advisor will be able to give 'superior' returns consistently. In my opinion, the top 10 advisors of India would have more or less given the same performance. Value addition, if at all, comes from giving proper sleep to clients. And that comes from proper diversification across asset classes; not by taking bigger risks. Call Center Jobs A Click Away


				*How To Make Money In Equity Markets Bonds Mutual Funds*



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