We are happy to introduce our new series on Prudent Investing. The Series will cover articles on various qualities of prudent investors and the Prudent Ways of Investing.
Prudent Investing
If you show good and careful judgment when handling all types of matters, you can be described as prudent. Similarly, a wise and well-thought-through decision or action can be called prudent.
It is also very important for an investor be very prudent when it comes to investing, as being prudent is one the most important factor which will reap investor good returns.
3 Important qualities of prudent Investors
1. They follow Asset Allocation Strategies
Investors, who follow asset allocation based on their risk profile, and investment time horizon, tend to successful investors. Historical Survey has shown that more than 90% of the investment returns over the long term are driven by asset allocation rather than timing the market or stock selection.
2. The Ability to Differentiate Rewards from Risks
Prudent/successful investors know how to differentiate risk from reward. When risk outweighs returns, they reject that investment decision.
The most important element is margin of safety, which they evaluate before making a decision.
3. They are disciplined
This is a must for an investor to be successful, one cannot succeed without discipline. Once invested, stay committed to achieve your goal and do not get tempted by market fluctuations. Starting SIP investments based on goals and Portfolio Rebalancing are an ideal example for discipline.
Watch out this space for more, next we will cover the how Asset Allocation is a Prudent Way of Investing.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY