In a society where people want their wives to be perfect, it’s not strange that they demand the same from their assets. If it is to qualify as a solid investment, it must be secure, provide decent returns throughout all market cycles, outperform inflation, save taxes, and many other factors.
Investing is simple in the digital age. At the stroke of a button, an investor may create zero-fee Demat accounts, which open up a world of possibilities for him or her. The investment has been made. As simple as it is to ‘invest’ your money, it is even simpler to lose it on ill-informed decisions that individuals are compelled to make in order to earn a fast buck. Everyone would be wealthy if it were simple to make money in the stock market.
It is not unusual to read of people losing their hard-earned cash on investments that did not suit them or that they did not understand. During the recent “dogecoin” frenzy, investors, particularly millennials, wanted a piece of the action that the cryptocurrency provided, despite the enormous danger that this investment carried.
It begs the question, is investing truly about increasing your savings by following hot ideas or trends, or is it more about knowing your risk quotient, personal financial objectives, and other aspects that can only be assessed through a more human approach?
Mutual funds provide an investor with the convenience of investing online, access to expert management at a reasonable cost, flexibility of investment modes through sip or lumpsum, liquidity to exit, and the ability to choose based on their needs and risk profile. These advantages are available to all mutual fund investors, regardless of ticket size. Mutual funds are very transparent due to SEBI’s stringent rules.
It is a well-known truth that investing and trading are two distinct processes, and for the novice investor, long-term investment outperforms short-term trading. However, when the markets are on an upswing, as they are now, it is not unusual for even novices to leap into riskier alternatives, with no regard for their risk tolerance or financial ambitions. Volatility is a market function, and what goes up must definitely come down one day, and when it does, it is critical to be prepared with safety valves in place.
Changes are necessary for a more mature investing environment that is transparent and allows an investor to make an educated decision. As an investor, you should carefully consider your investing alternatives depending on your requirements, risk tolerance, and financial objectives. It is not a smart idea to pursue rewards without considering the danger. The regulator must also step up and educate investors on the different investment alternatives, their inherent risk, and their behaviour. Only then will we be able to progress toward a system that benefits everyone.