4 things to keep in mind when investing, to compound your wealth
Synopsis
Sandeep Chhajer, the author, shares four unconventional ways to invest for the new year.
At the onset I wish you all a very happy and focused new year !!
We are in the season of new year resolutions but the rate at which they get unfulfilled ensures that I don’t write on new year investing resolutions but just 4 uncommon investing ways which when followed may make a profound effect on your wealth. So let’s read the below 4 points and as you read please put agree or disagree against each point so that you can correct your investment making decision wherever required
1. Always begin with an end in mind
When we board a flight we know exactly what our destination is, even while driving we use maps to reach our
destination but when it comes to investing, we make no real effort towards defining our destination.
2. Meet the biased investor in you
Due to our past investing experiences or some story we have heard from our family member/ neighbour/ society we have
grown up in, we develop strong perceptions about certain financial products and it is mostly that mindset that dictates
our investing decision.
The time has come to move from perception based investing to data based investing and from product based approach to
solution based approach. Hence we need to understand the pros and cons of all investment products without any bias
and accordingly take our investment decision.
Also managing one’s investment behaviour is one of the most important elements which aims at creating and
compounding wealth and it all starts with you understanding and recognising the biased investor within yourself.
3. Use the same yardstick to compare all investment products:
We often hear people saying that I bought this real estate 10/20 years ago at Rs X per unit and today it is Rs 2x or 3x per
unit or invest y amount per year for N number of years and get 2y/3 y after 15 /20 years. So how does one go about
comparing returns from different financial products so that they get a true picture of their investments return. It is advisable to use CAGR (Compounded Annual Growth Rate) or IRR( Internal Rate of return) as the benchmark rate to
compare investment return across all investment products. It will provide them with the right method to assess the
investing experience across investment products. A note of caution: the results might actually surprise you.
4. Investing is a long term phenomenon, don’t use short term returns for investing decision:
I met a new investor at the beginning of 2022 and to my surprise all his money was invested in international equity and
tech fund. After doing a deep dive in the investing decision process I understood it was largely driven by the returns in
the immediate past which unfortunately is a very common practice among investors where they get lured with the last
1/2 year return of a financial product. Since investor returns are forward looking, investing just on the basis of immediate
past return or because others are investing, normally leads to underperformance in the long term. Hence, it is better to
avoid following the herd and remember what is popular can be seldom profitable .
May the year 2023 make you a more focused investor and may you adapt the above 4 unconventional investing ways
which may help you to compound your wealth.
Disclaimer: The views expressed are of the author and are personal. TAMPL may or may not subscribe to the same. The
views expressed in this article / video are in no way trying to predict the markets or to time them. The views expressed
are for information purposes only and do not construe to be any investment, legal or taxation advice. Any action taken by
you on the basis of the information contained herein is your responsibility alone and Tata Asset Management will not be
liable in any manner for the consequences of such action taken by you. There are no guaranteed or assured returns under
any of the scheme of Tata mutual Fund.
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