To become successful investors, the priority cannot be picking the best performing fund. Instead, investors should focus on assessing their risk appetite and optimum asset allocation to achieve financial goals, said Sachin Relekar, CIO-Equity, LIC MF.
At Cafemutual Confluence 2020 Investment Marathon, Sachin said, “Yes, picking good performing funds is crucial but it will only be useful if an investor completes his risk profiling correctly and ensures appropriate asset allocation. If these two things are done correctly then 90% of the job is done.”
Elaborating further, Sachin said that an investor’s risk profile has two components – risk appetite and risk tolerance. Risk appetite is the amount of risk one is willing to take while risk tolerance is the amount of risk that an investor’s finances can handle. These two factors determine asset allocation for any investor which is instrumental in achieving financial goals.
Further, Sachin added that asset allocation is a dynamic strategy. Therefore, investors need to revisit their financial strategy from time to time to reflect the changes in their impending responsibilities and lifestyle.
Sachin added that if investors find this process difficult, they can always consult advisors. In fact, Sachin underlined the importance of having an advisor as it helps investors strategize their investment journey, ensure proper asset allocation and make the right decisions.
Sachin highlighted that mutual funds are simple, highly regulated, transparent, liquid and technologically advanced products. To get the best out of mutual funds, investors should understand the risk involved in each fund and ensure proper asset allocation.
Click here to watch Sachin’s session at Cafemutual Confluence 2020 Investment Marathon.
