Jignesh is a third generation entrepreneur. He runs a two-storey retail jewellery shop on the busiest street in the town. He’s expanded his business impressively after taking it over from his father, but this wasn’t a struggle. His elder brother has helped him immensely in expanding the business.
Therefore, Jignesh always had spare time to do other activities.
So he became a stock market trader.
Share trading was a thrilling experience for him. It earned him some money. Then he decided to take this ‘thrill’to the next level and started dealing in Futures and Options (F&O).
While it rewarded him at times, on many occasions, he lost money. The recent experience has been the worst. He lost around Rs 10 lakh in a month’s time during the market meltdown that happened post budget.
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His elder brother reprimanded him for losing family’s hard-earned money. To keep him busy, his brother recently opened another jewellery shop in the same city. Jignesh has suddenly become extremely busy. Now, he hardly gets time to track markets.
As a result, he quit share trading and F&O dealings and started investing in mutual funds instead.
But he still wears the trader’s hat.
He invests in equity-oriented mutual fund schemes including sector and thematic schemes based on his assessment of potential market movement.
In last four months, he has churned his mutual fund portfolio thrice.
[Read: How Mutual Fund Portfolio Churning Impacts Your Returns]
About a week ago, he encountered an interesting event.
One of his regular customers, who happened to be a professor of finance at a reputed business school, came to his shop the other day.
Jignesh thought of asking him a few of his doubts, knowing his reputation. The professor was happy to answer all his queries.
‘Sir, which equity mutual fund schemes will give me market-beating returns in a short run’, Jignesh inquired.
‘First of all, you shouldn’t invest in equity mutual fund schemes for the short-term’, the professor responded.
This reply made Jignesh a little uncomfortable so he asked, ‘What’s the ideal timeframe for investing in mutual funds?’
‘At least five years’, professor denoted by signs.
This answer crippled Jignesh’s enthusiasm. ‘Five years? It’s too long a commitment’.
In reply, the professor only nodded his head.
On the one hand, Jignesh thought the professor’s focus was on too much theory.
But on the other hand, he quickly realised that due to his trading psyche, he always lost money in markets. And by staying invested for longer, the professor grew his wealth through mutual funds.
[Read: How Even 1% Difference Can Make A Huge Difference To Your Investments]
If you are new to mutual fund investing, you can learn from Jignesh’s mistake.
When investing in equity mutual fund schemes, be prepared to hold your investments at least for five years.
Taking their conversation forward, Jignesh exclaimed, ‘But the market keeps moving up and down, and if I hold my investments for five years, how would I benefit?’
This wasn’t an unfamiliar question for the professor.
Always remember these three factors Jignesh, the professor advised.
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Never invest before knowing your financial goals and risk appetite.
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Based on this, chalk out a personalised asset allocation. Asset allocation plan is nothing but the proportion in which you invest in various asset classes – equity, debt, gold, and real estate.
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And to benefit from market volatility, you should opt for a Systematic Investment Plan (SIP).
Investing in SIP helps you benefit from the rupee-cost averaging. When you invest a predetermined amount at a pre-specified date, you not only inculcate the habit of saving but also end up getting more units when markets are down. When the Net Asset Value (NAV) of a mutual fund scheme rises, the total value of units goes up, thereby making you more money.
[Read: All You Need To Know About SIPs]
Jignesh lamented, ‘I think I have been doing everything wrong until now. So what do you suggest as a remedy?’
The finance professor suggested a 5-step action plan, as follows:
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Review your existing portfolio and try to see if any scheme is well aligned with your long-term investment objective and the risk appetite.
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Evaluate all available mutual fund schemes and shortlist the ones that have a proven performance record across timeframe and market phases.
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Prefer mutual fund schemes offered by process-driven fund houses employing experienced fund management team.
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Opt for direct plans and invest through SIP route.
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Don’t forget to review your investment portfolio once a year.
[Read: Mutual Fund Direct Plans - Everything You Need To Know]
This impromptu session with the professor was a wake-up call for Jignesh.
He couldn’t ask for more help and guidance and thanked the professor, offering him a special discount coupon he had launched for his esteemed customers.
Next day onwards, he started reading about mutual funds and searched the internet for some quick mutual fund selection advice.
But soon he realised selecting a mutual fund based on the parameters the professor had explained was easier said than done.
Watch this video:
At that point, he decided to seek expert help in scheme selection and that’s when he read about PersonalFN’s unbiased mutual fund research services.
Today, PersonalFN’s flagship research service, FundSelect, which Jignesh has subscribed to, provides him with a comprehensive view to Buy, Hold and Sell mutual fund schemes. It outlines the rationale behind the recommendations in detail.
Want to know more about PersonalFN’s Fund Select Report? Yes? Click here.
PersonalFN, an independent unbiased mutual fund research house, has developed its own mutual fund research methodology. PersonalFN follows an S.M.A.R.T. score matrix:
S – Systems and Processes
M– Market Cycle Performance
A - Asset Management Style
R - Risk-Reward Ratios
T - Performance Track Record
PersonalFN’s stringent scoring model ensures the scheme is tested holistically. The mutual fund schemes that pass our rigorous test and achieve the maximum composite score on all parameters (based on pre-specified weights) make on to PersonalFN’s recommendation list.
How has been track record?
PersonalFN's FundSelect has 15+ years of impeccable track record.
(Source: ACE MF, PersonalFN Research)
Performance as on March 28, 2018
Past performance is no guarantee of future results.
FundSelect has been based on one simple motto: “Be steady. Be alert. Be winning.”
Every month, our FundSelect service will provide you with an insightful and practical guidance on equity funds and debt schemes——the ones to buy, hold, or sell——to assist you in creating the ultimate portfolio that has the potential to beat the market. Subscribe to FundSelect today!
Happy Investing!
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