Investors often find it difficult to decide on the right time to invest. There is a tendency to invest when everyone else is investing. Mutual funds have devised a very sensible solution for investors to deal with the issue of timing – The Systematic Investment Plan. In SIP the investor buys units every month for a specific amount so his investments accumulate over time, and he is able to participate in the market regularly without worrying about the right timing.

Many investors seem to invest purely because the debt markets have under delivered in the last two years. If this is the reason for shifting into equities, then this reasoning is clearly flawed. Every investor must seek to practice asset allocation – whether equity or debt. It would be a good idea to be in both and investors who can’t determine the ideal asset mix, may want to see a financial planner.

Investors should also a being taken in by Credit as it could lead to investing in the right products at the wrong time. Investors should always try to keep a balance, instead of investing all the funds into one product. It is a good idea to have a core investment in a well diversified equity and debt fund and then add to it, the other funds like sectoral funds, specialized funds and the like. Equity funds focusing on different sectors and styles have both risk and returns. For Debt funds, the short-term funds would be less risky, but will have low returns whereas long-term has high risk and more returns.

Fund: Investing too little is risky, and too many is unwieldy. It is a good to invests across 3-4 funds, and buy the products of large, well known funds.

Investors have to review a mutual fund portfolio very often, most of them publish their portfolios every month. Investors can check for returns and performance of a fund to judge how well a fund is doing.

Staying invested pays better than churning too often.

Vinod Chavan

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