It’s that time of the year when everyone’s making resolutions! So why not resolve to be a better investor next year?
As 2022 starts after the high of 2021, we would like to lay out some simple rules that can make your investing journey fruitful next year. Here are the ten investing resolutions to guide your investing journey:
Know your investment profile
Before you start your investing journey or associate with an investment advisor to guide you, you should know what you’re looking for. Understand your goals for investing and what type of risk you can digest at your stage in life. This would enable you to choose the perfect investment product mix for yourself!
We’ve all heard of the adage, “don’t put all your eggs in one basket.” This holds more in investing more than anywhere else. Imagine having exposure to IRCTC when the stock went berserk. If IRCTC was the only stock you held, you might have had a heart attack, but you would have sailed smoothly with that exposure if the stock was only <5% of your investment portfolio.
Asset Allocation is Key
Reasonable asset allocation can improve your investing experience drastically! Once you know your risk profile, you can choose the appropriate equity, bonds, and gold mix. In addition, being tactical in your asset allocation gives you an even better experience. For example, look at Wright’s Balanced portfolio. Its tactical asset allocation led it to diversify into bonds and gold in March 2020 and have a much lower drawdown than the index.
Make use of momentum strategies.
Many swear by fundamental analysis to be the only guiding principle for their investment. But here’s the breaking news, markets are irrational! So the markets tend to underreact at any information or event at the start but eventually herd towards the opportunity and create a trend and overreact. Fundamental analysis cannot describe this journey of stock prices, and momentum investing based on trends can be a differentiator. Wright Momentum is one such momentum strategy that you can invest in.
Markets change their behavior drastically, and a strategy that works well at one time might not do well in the next period. Therefore, it is always wise to periodically look back at your allocation and adjust for the changing market conditions. If you are following an advisor, try to rebalance when they recommend. Don’t miss out on the opportunity to maximize your returns.
Minimize investment fees
More trading = more fees. You don’t want to pay unnecessary fees just for action in your portfolio. More trading does not give you better returns. Researchers recommend an optimal amount of rebalancing, and there is no need to churn unnecessarily.
Say no to FOMO - Control emotions.
Take it from an experienced quant manager; emotions are the biggest enemy of a trader! The best way to consistently do well in the markets is by having a systematic strategy, not overreacting to good news or panicking at the first drawdown. Being methodical and sticking to a system helps make an investor’s journey fruitful.
SIP but smartly
The key to building a sizable portfolio is to keep investing consistently. Always have a SIP as part of your investing plan. But investing blindly in the index is not the most optimal, and if you’re doing a SIP in a fixed deposit - you’re doing it wrong! Instead, do a SIP in a tactical or momentum-based product that can safeguard your investment and give you opportunities to grow.
Explore new investment products
If we talk to our older generation, they only know of fixed deposits, gold, real estate, or mutual funds. But in today’s age, there is a much more comprehensive range of investment options available. Some of the best ones are smart beta strategies like momentum or innovation and tactical asset allocation strategies.
Invest in global markets
Global markets can act as a hedge for volatility in India, significantly when the US Fed tapers the liquidity. There are several excellent options available for investing globally for Indians. Wright’s Tactical ETFs portfolio on Vested being one such product. Add a global flavor to your portfolio so that you have access to opportunities worldwide!