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Wednesday, 2 July 2014

Stick to Your Financial Goals

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Stick to Your Financial Goals





Experts recommend investing in equity to achieve financial goals that are seven-nine years away, and in debt if the target is less than three years in any market condition

Shut out the noise if you want to earn from this stock market.

Most financial advisors are busy repeating this statement to their clients. The provocation: even their most committed clients are unnecessarily getting worked up by all the noise coming from different quarters. Wondering what is this noise that they are all talking about? Here is the scoop: noise is synonym for unsolicited or useless advice.

 

Here are a few samples. The market is hitting historical highs; don't you think you should sell at least 50% of your holdings? Why are you not stopping your systematic investment plans (SIPs), with the market soaring to all-time high? Then the contrarian pitches in with his bit: pull out all your money from the bank, borrow if you can, and put the money in stocks -the market is going to deliver stupendously in the next five years.

 

Needless to say, all these advices, coming from well-meaning colleagues, acquaintances, pundits, among others, can be a bit too much for even the seasoned investors. Since they pay money to their advisors, they call them and ask: what should we do? All this talk really gets to people and they get confused. When there is a slump in the market, I tell them to hold on to their investment and don't try to get out of the market. When the markets are on an upswing, I tell them not to get swayed by all the big talk.

 

This happens at regular intervals. Now, we are witnessing a fear phase, and individuals are a bit apprehensive. But if the market keeps moving up for the next two to three years, there would be a greed phase. At that time, people would call up and ask whether they should take a loan and invest in the market.

 

When they see the market going up over a period, they start getting scared. They believe that it won't be sustainable. That is where the confusion begins and the noise adds to that.

 

Experts say that most of these talks is nothing but some form of the mythical "perfect timing" of the market. Timing, for the uninitiated, is the elusive art of buying at low and selling at high. Even the most successful investors aver that the theory is extremely difficult to practice in the market. Remember the suggestion asking you to wait for the election result before investing in the market? Or wait for the next budget or let us see how monsoon progresses?


They were trying to time the market, and chances are that such people will keep finding one reason or the other to postpone their entry or exit, say experts.


You get a lot of noise on the market, but you have to be proactive and find out about yourself to ensure your goals and investments are on the right track. Idividuals to take a close look at their financial goals and your investment choices. The thumb rule is: you invest in equity to achieve goals that are seven to nine years away. The money should be in debt for goals that are less than three years away.

This rule doesn't change, no matter what the market condition is.

Also, while examining the portfolio, if you find that you have made some dud investments, you can use the current buoyant market to get rid of them

Individuals should also acquaint themselves with the market to reassure themselves.


There is enough literature available on how the market has fared over a long period. Go through it, it will help you to stay focused and ignore the entire buzz

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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