Few days back when Sensex conquered the 60000 mark, there were national headlines that the premiere stock exchange now has 8 crore plus investors registered with them, which is said to have increased by 60% than the pre-pandemic levels. In short, they have added more investors in just 18 months than what they had been doing in each decade since the inception of Sensex.
Reasons can be the phenomenal performance of the markets, lockdowns which made people stay at home, inclusion into the banking system, updation of UIDs, the availability of low-cost high-speed internet data or we can say the combination of all of these. Back in March 2020, though most of the parameters remained the same, the world seemed coming to an end & Investors had little expectations from markets, which was then followed by a spectacular rally beyond every calculation.
The whole world of investments is doing superb. But the picture doesn’t look the same, when we turn to the active portfolio or mutual funds space. If we consider these 18months from April 2020 inflow into equity funds dipped and turned negative from July 2020 to February 2021, whereas the stock market was adding record numbers of investors during this period.
With this backdrop of the huge gap between our returns expectations & the actual returns earned during this period, our return expectation is reset making it all the more important to do a proper trade-off between the two & act wisely.
Stocks or Portfolio, which way to go ??
We investors are at a crossroad today, where on one side, the spectacular gains on daily or weekly basis lure us, the advantages of professional fund management, diversification, etc hold the rope on the other side.
Do It Yourself (DIY) or seek professional guidance?
Individual stocks or structured portfolios, an investor always has the option of seeking professional guidance or going the DIY way, which is a fallout of the increasing digitization in our lives.
An introspection on the following points will give clarity :
1 – Is momentum or action bias driving our focus shift from Portfolio to stocks & how workable it seems alongside our core profession or activity?
2 – Are we factoring in the risk-reward features of various investment options & their suitability to our specific profile?
3 – Have we looked into the long-term return averages ( one investment cycle at least) & questioned the sustainability of the recent numbers?
4 – When going the DIY way, are we checking on important investment rules & disciplines like asset allocation, diversification, sizing of the bet, etc.?
5 – Are we sticking to our plan to achieve financial goals or deviating?
Interestingly, all available options have their respective costs & benefits, the key is to keep checking & ensure that we do not overlook important aspects & the basic investment discipline is followed so that the investor return matches with that of the investment because an interesting study reveals that less than 5% investors are able to enjoy the returns that the product actually delivered. For this to happen, one has to stay put with the right investment for at least one investment cycle through the crest & trough of the markets, which is where the role of an advisor is very relevant.
Happy Investing!
Team @ MintBox Advisory
DISCLAIMER: PLEASE NOTE, THE ABOVE NOTE IS FOR INFORMATION PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS INVESTMENT, TAXATION, AND/OR LEGAL ADVICE. MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME-RELATED DOCUMENTS CAREFULLY.
Mutual fund investments or Investment in securities market are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance is not indicative of future returns.
