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- 1. Past Returns
- 2. Net Asset Value (NAV)
- 3. Ignore Short Term fluctuations
- 4. Don’t try to time the market
- 5. Returns are more important than expense ratio
- 6. Stepping-up your investments is the path for a successful end
- 7. Invest in ELSS for tax saving purpose
- 8. Have minimum cash in your bank account
- 9. Invest in funds that suit you the most
- 10. All Mutual Fund companies are safe to invest
- Conclusion
When we hear success stories of our role models or people who inspire us, we are motivated to follow their footsteps. However, while investing, trying to replicate doesn’t work. There is a variety of investment options and mutual funds are among the best. Mutual Funds are suitable for all types of investors. What suits one investor doesn’t necessarily suit the other. Though the choice of the fund might be good, the time of your entry might not be. Patience and right approach is the main secret of successful investors. This article explains about the 10 Secrets for a Successful Investment Journey.
There are many false beliefs and myths about investing, successful investors ignore these and concentrate on what actually is important.
Let me share tips and tricks that can help you become a successful investor:
1. Past Returns
Yes, past returns are important, but not to the extent that you invest in funds entirely based on this. Fund managers sometimes take higher risks than normal, that would have worked in their favour. However, this might not pay off always.
Tip: Rather than considering short term high return, always consider long term consistent returns. High returns over long durations are the hallmark for a good mutual fund.
NAV of a mutual fund shouldn’t matter at all. It doesn’t mean if a fund’s NAV is lower it gives good returns. NAV doesn’t indicate how much would a mutual fund grow.
Tip: Choose funds based on important factors like consistent past returns, AUM, peer comparisons, fund house, fund manager etc.
3. Ignore Short Term fluctuations
Short term returns are deceiving. No investment will have only an uptrend. Equity funds are for the long term, checking the value of your investment journey every day and panicking because of a downtrend is unnecessary. Do not take impulsive decision based on short term returns. If you do panic. selling, then you’ll just end up selling low and buying high.
Tip: Stay invested for longer durations and review your portfolio annually. Don’t panic at the time of a market fall, do proper research or talk to a mutual fund advisor for the right move.
4. Don’t try to time the market
Even the most successful investor never hit the bull’s eye when it comes to timing the market to invest. Timing the market means, buying low and selling high. There is no guarantee that the current level is its lowest or highest, it can go down or up furthermore. Therefore, the best strategy is to keep investing regularly to average out both the risk and cost.
Tip: Opt for SIPs or STPs for your mutual fund investments journey. These regular monthly investments will help you address the timing of the market issue. It will average out your cost and risk.
5. Returns are more important than expense ratio
Most investors consider the expense ratio as a parameter while shortlisting funds. Though, its good to consider the expense ratio, it doesn’t mean you give up on a fund that has proven to be a star performer. Expense ratio is already accounted for while showing the fund returns.
Tip: If you are considering two funds across the same category, and the fund that has given good returns has a higher expense ratio, doesn’t mean you do not invest in it for the reason of high expense ratio.
6. Stepping-up your investments is the path for a successful end
Did you know if you increase your investments slightly, the returns would be higher than what you actually think? Let’s look at an example:
| Scenario 1 | Scenario 2 | |
| SIP Amount | Rs 15,000/month | Rs 16,000/ month |
| Return | 15% p.a. | 15% p.a. |
| Duration | 10 years | 10 years |
| Step up | No Stepup | 10% annual step up |
| Maturity Amount | Rs 41,79,859 | Rs 59,36,128 |
From the above table, Scenario 1 shows a SIP of Rs 15,000 done for 15 years would earn you around Rs 41 Lakhs, while when you keep stepping up your SIP 10% annually, the return is almost Rs 17.5 Lakhs higher.
Tip: Aim to increase your investment amount every year. It’s not difficult like you deserve annual increment in your salary, your investments journey deserve their increments as well.
Estimate Returns by using Step Up SIP Calculator
7. Invest in ELSS for tax saving purpose
For tax saving, ELSS funds have proven to be the best under Section 80C. They have the lowest lock-in and give higher returns than any other tax saving instrument.
Tip: Invest in ELSS for your tax saving and let it help you boost your portfolio returns.
8. Have minimum cash in your bank account
Interest from a savings bank account is very low. Liquid Mutual funds are a good replacement for a savings bank account. Usually, to invest in a mutual fund, it takes around 3-4 days, while in case of liquid funds it happened instantly. Also, redemption up to 90% of the invested value happens within minutes. Liquid funds are low-risk funds. Liquid funds these days are giving returns up to 7%.
Tip: Hold your cash in Liquid Funds rather than having them in your bank account. These are a good alternative for a savings bank account.
9. Invest in funds that suit you the most
Mutual Funds are not just for investors who can take the risk or for investors who want to invest for the long term. There is a wide range of funds that an investor can choose from. You can choose based on your:
- Risk Appetite – high, medium or low.
- Investment Horizon: Long, medium, short or ultra short term funds
- Market Cap: Large, Mid, Small, Multi, Hybrid etc.
- Industry: Pharma, IT, Real Estate, etc. and so on.
Tip: Explore all the categories and options available and build a portfolio that would best suit your profile.
10. All Mutual Fund companies are safe to invest
Don’t be under the impression that only big names are good fund houses. All companies are regulated and monitored by SEBI.
Tip: The criteria shouldn’t solely be the fund house, but whether or not the fund is suitable for your requirements.
Conclusion
Follow these tips and make sure you are invested for longer durations rather than panicking by short term movements. You can also be a successful investor in the right direction and discipline.
Happy Investing!
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