The MF industry currently offers over 35 scheme categories and 2000 schemes. Investors typically find it difficult to select the relevant few schemes for their investment portfolio. In this context, Cafemutual hosted its Associate Editor, Nishant Patnaik at Cafemutual Confluence Investment Marathon (CCIM 21) who simplified mutual fund investing.
Nishant interestingly spoke about some of the most priced teachings of Ramayana and Mahabharat and beautifully integrated them into investment lessons.
Lesson #1 - Avoid obsessing over schemes
Raavan was obsessed with his powers, and in the quest of showcasing those, he abducted Sita. However, his obsession subsequently led to his destruction.
Obsessions can be harmful, yet investors tend to obsess over selecting schemes that will generate good returns. Instead, investors should first identify their goal and thereafter opt for a scheme that aligns with their investment philosophy.
Lesson #2 – Don’t follow others blindly
Duryodhan blindly followed Shakuni Mama but little did he know that it would lead him to devastation.
Following others blindly may keep investors away from their unique financial goals. If something has worked well for your friends/relatives it doesn’t mean it will work well for you as well. Investors should be mindful of their goals and should not follow others blindly.
Lesson #3 - Say no to NFOs
Duryodhan’s folly made him select Narayani Sena over Lord Krishna for the battle of Kurukshetra. He recklessly forgot the fact that nothing could outpower the supremacy of Lord Krishna.
In the financial space, investors typically get lured by NFOs and forget the importance of having a proven track record. Existing mutual funds with a good track record make a better choice for investing.
Lesson #4 – Don’t put all your eggs in one basket
Yudhishthira had bet all his wealth while playing Chausar and lost his entire fortune.
Something similar happens when it comes to investing. Certain investors tend to allocate a major chunk of their money in an apparently attractive avenue like bitcoin, etc. and put their funds at stake. This is where asset allocation and diversification becomes important.
Lesson #5 - Stay away from timing the market
Lord Krishna has advised Arjun, ‘Fal ki chinta naa kar karma kiye jaa.’
In financial parlance, karm symbolises investing. Investors should demonstrate discipline and continue to invest without timing the market. A disciplined approach reaps the fruits (fal) of investing.
Lesson #6 - Don’t exit mid-way
Due to the circumstances created by Ravan, Lakshman had to leave Sita in search of Ram. Had Lakshman not left Sita, Ravan would have not succeeded in his evil motive.
Taking this to the financial domain, we learn the importance of staying invested and not existing mid-way. Investors should continue with their investment journey and not get intimated by fluctuating NAVs or market noise.
Additionally, Nishant also spoke about Cafemutual’s latest book, Making Money through Mutual Funds (MMTMF) and shared with us some easy tips for generating wealth through mutual funds.
- Investors should identify their reason (goals) behind investing in mutual funds. Having a goal gives direction to the investment journey
- Investors should undertake the risk assessment test to know their risk appetite before making investment decisions. Interestingly by answering the questionnaire in MMTMF, investors can understand their risk appetite better
- Before deciding to invest, it is important to evaluate funds’ performance against their benchmark, fund manager’s performance, costs involved, etc.
- 5 to 6 schemes are sufficient to create a comprehensive portfolio for meeting most of the financial goals
- Investors should nurture their investments by way of annual monitoring activities
Nishant simplified the entire investment cycle through six financial lessons. Watch this video to understand each rule in detail.
