3 Mutual Fund CEO’s Answer ‘What Stands In Mutual Fund Investors’ Way Of Creating Long Term Wealth From Their Investments?’
Often it is seen that emotion based financial decision making (on the basis of greed and fear) can be detrimental to achieving one’s financial goals
Nimesh Shah, CEO, ICICI Prudential Asset Management Company
Often it is seen that emotion based financial decision making (on the basis of greed and fear) can be detrimental to achieving one’s financial goals. The fear of volatility is another aspect which stops investors from investing into equities. However, what is often forgotten is that there are products designed to benefit from volatility.
When it comes to investments, patience is of great essence. Historically, it can be seen that staying patient and remaining invested over longer term has yielded rich dividends. So, time in the market is more important than timing the market.
Aashish Sommaiya, Managing Director, Motilal Oswal Asset Management Company
It’s not difficult to plan the finances for someone who hasn’t planned their life, it’s impossible! If life is not planned it is that much more difficult to plan the finances I am sure. I know not much goes as planned but that doesn’t mean one doesn’t plan – at least you respond rather than react, at least you minimise the impact of the unexpected.
So periodic reviews of goals, milestones, needs and aspiration, on a realistic basis is a must and also the will to strive towards those is a must. As can be seen from the response to your previous question, financial plan is all about a series of optimization calculations, right?
What is difficult is for the individual to plan and then demonstrate the will and the ambition to get there. Lot of times people put it down to discipline, I don’t think it’s a discipline issue, it comes from will and ambition. Also, remember investments are not made just to beat inflation or meet a goal, they are to be thought of for meeting different levels of goals – beating inflation, enhancing purchasing power to improve standard of living, to meet aspirations and finally to achieve dreams. With a good plan, the will to achieve it and then financial planning to back up, there is a lot that can be done.
Vishal Kapoor, CEO, IDFC Asset Management
Firstly, it’s important to know enough about the product category and how it can benefit investors. Some investors find it challenging to differentiate between the various asset classes (equity, debt, cash etc) that mutual funds offer, or get confused with the wide variety of funds available, terms (jargon) used etc. Each category of funds has as distinct risk-return profile, and needs a different holding period for optimal performance. A qualified, experienced advisor's help can be invaluable to help with this process.
Once a goal is finalized and investments started, it's important to stay the course. During market volatility, investors can often panic and make rapid changes to their plan including stopping their SIPs or redeeming long term investments. It's critical to accept volatility as part of the investment process.