INVESTMENT STRATEGIES

We all make emotional financial mistakes. Despite sound knowledge of the subject we make these mistakes and subsequently suffer the consequences too. Many a times, we realize them and vow not to repeat the same but again fail to practice it in real life at real times. Once we realize that we are prone to make mistakes, we will feel the importance of investment strategies too.

Strategies are essential to derive something meaningful from an uncertain environment. Stock Market’s short term environment is always uncertain hence it is useful to invest through strategies. There are many effective investment strategies like SIP, Fixed asset allocation strategy and dynamic PE ratio strategy. Details of all these are available in the book Right Attitude to High altitude".

Prominent and most popular among all is SIP (Systematic Investment Plan). This is not a separate plan but is just a facility to invest in MF schemes in a disciplined way for long term. This facilitates fixed amount of investments at fixed frequency for the chosen tenure. It is convenient as well because most MFs have tied up with various banks to offer ECS facility such that every month the chosen fixed amount is electronically transferred from your bank account to the chosen MF scheme on the chosen fixed date.

You should however understand one fact very clearly. Investments through SIP during an upward journey get averaged out on up side and during a downward journey on downside. Therefore if you are unable to understand the phases correctly, you should continue investments for a very long period of say 10 years. Caution: Never stop SIP during a falling market and despite appearance of notional loss.