When individuals start their investment journey, they must be prepared for everything that comes with it whether the market booms or corrects significantly.
Here, there is no “No Strings Attached” factor! With investments, you must nurture them with care, patience, and perseverance.
However, many investors neglect these characteristics when it comes to their portfolio holdings and end up making hasty decisions.
A little bit about market volatility
Markets do go crazy at times, but that doesn’t have to mean that you should also lose your cool during such times. Patience and calmness may seem impossible during significant market movements, mainly when the market corrects.
Still, these traits help you not make impulsive decisions that may be harmful and can create a massive dent in your investment purpose or objective.
Ensure proper diversification so that your portfolio can absorb market volatility as efficiently as possible and minimize overall portfolio risk.
Additional read: How to set financial goals?
Importance of an optimistic mindset in mutual funds
What does being optimistic mean? An optimistic person is hopeful and has a positive perspective that things will turn out for the better.
A pessimist person who thinks of all the worst-case scenarios and prepares for them. So, in short, an optimistic person believes their investments will grow and create the corpus they require.
At the same time, the negativity of a pessimist person causes the investor to act in fear and make conservative decisions. Have you ever heard of this, “Where there is a risk, there is the reward”?
Investors should always have faith in their investments. Whenever an individual invests, detailed analysis and research go in before the investment decision is made.
In financial matters, you should not react in fear and get into the mode of panic selling. When having hope and enthusiasm for investments, investors learn a lot from their mistakes and improve their investment style over time with hands-on experience.
They are not the people who will give up after a setback. Instead, they take it as a learning experience and grow.
Importance of patience in mutual funds
In favorable market conditions, every investor can generate steady returns and create wealth to a certain extent. But the main challenge is to stay invested even when the markets are highly volatile and unpredictable. This is where patience comes into the picture.
There can be a few reasons why equity funds or equity-related investments are not held for more than two years on average like
- Investments may not be made with a financial objective in mind
- The investor may want to generate returns on his portfolio quicker or faster than what is being generated.
- The desired returns may be achieved, so the investor may want to book profits and not take additional risks.
- Or liquidity requirements that have forced the investor to cash out his investments.
One thing to be kept in mind regarding equity mutual funds is that the longer you stay invested, the better you have to compound your investments and generate the targeted returns.
When looking to achieve a long-term objective, an investor should opt for a SIP (Systematic Investment Plan) approach, which allows the investor to invest in small amounts and simultaneously capture the best of all market movements.
It also creates a disciplined system of investing in every individual. Mutual funds are a great avenue to create wealth and accomplish your financial goals.
An ideal investment horizon for an equity mutual fund is a minimum of 5-7 years. When held for a longer time, the funds get compounded, especially in growth plans.
Want to know how? In growth plans, the returns generated on the funds invested in the previous SIP installment get reinvested in the next period. This helps in generating returns on the returns generated previously.
Conclusion
In conclusion, one piece of advice is to never project your fear onto your investments. When you do this, you invest with a very conservative approach and may lose out on highly profitable opportunities.
At the same time, we do not encourage you to be wholly optimistic and not plan for times of contingency. Always plan for your emergency funds requirements first and then increase your risk basket-wise.
If we can be patient while squeezing out the toothpaste till the very end of the tube, why not be patient while investing in the market?
Consult an expert advisor to get the right plan
Disclaimer
Mutual funds are subjected to market risks. Always make investments based on your risk profile. Choose which fund suits your risk appetite and is perfect to meet your investment goals and objectives.
