Why Your Neighbour’s Portfolio Isn’t Your Ticket to Riches
But before you chase their success story, here’s something to think about—what works for them might pull you into financial quicksand.
The Hidden Truths Behind the Bragging
- Selective Storytelling: Wins are shared, but losses are conveniently left out.
- Different Risk Appetite: Their tolerance for risk might not match yours.
- Luck Vs Strategy: What they call ‘genius’ could just be blind luck or maybe the ‘beginner’s luck’.
Why Copying Could Cost You
- It’s Personal: Your financial plan should reflect your life—whether that’s buying a house, funding education, or retiring early.
- No Two Journeys Are Alike: Their destination might be quick riches; yours could be steady wealth building. Both need different roadmaps.
- Comparisons Kill Confidence: Constantly measuring yourself against others can lead to poor decisions driven by envy or FOMO (fear of missing out).
Your Blueprint for Success
- Diversify your portfolio to cushion risks.
- Align investments with your timeline and goals.
- Consult a financial expert to keep emotions out of the equation.
So, next time your neighbour boasts, smile and think: “I’m crafting my own success story.” The real secret to wealth?
Staying true to your financial plan—not theirs.
(Contributed by MF Alam, Sr. Research Analyst, Hum Fauji Initiatives)
Are NFOs Worth the Hype?
Imagine, A brand-new smartphone launches with ‘promises’ of groundbreaking features, but no user reviews are available yet. Would you buy it right away or wait?
This is similar to what New Fund Offers (NFOs) in mutual funds are like.
NFOs let fund houses introduce new schemes at ₹10 per unit, often wrapped in themes like Defence, Infrastructure, or Energy.
They sound exciting but here’s a surprising fact: Existing funds in the same category, with an established track record, usually perform better than the newbies!
Why Do NFOs Create Hype?
- Unique Themes: Project as ‘Market me Naya Aya Hai!’ – Focused on trending areas like EVs, Energy, Healthcare or international markets, whether they are likely to be profitable or not.
- Affordable Start: ₹10/unit feels like a bargain while actually the price (or NAV) is meaningless in Mutual Funds.
- Limited Window: Creates a ‘now or never’ vibe getting you into a fear of missing out.
But Here’s the Flip Side:
- No Track Record: You can’t check past performance.
- Hidden Costs: Initial expenses can be high.
- Market Timing: Funds launched during market highs often struggle later.
What History Says: Only 3 of the 7 top NFOs since 2019 beat their category average in year one.
What Should You Do? Investing in new funds can be a shot in the dark.
The Smarter Move? Go for mutual funds with proven performance over 3-5 years. But if an NFO truly fits your goals, evaluate it very carefully.
(Contributed by Vishakha, Relationship Manager, Team Vikrant, Hum Fauji Initiatives)
When Markets Get Shaky: Strategies for Staying Calm and Collected
Markets can feel unpredictable, but as the chart shows, patience and long-term thinking are key to successful investing. Despite multiple crises, Indian equities have grown significantly over the last 38+ years, delivering a 13.9% CAGR (Compound Annual Growth Rate)—multiplying wealth 153 times since 1986! No other investment avenue comes anywhere close to this…
Here are 5 simple tips to help you navigate turbulent times:
- Stick to Your Goals
Investing is meant for long-term goals like retirement or education. Short-term events may seem alarming, but remember: time in the market matters more than timing the market. - Take comfort from history
The chart highlights periods of market decline, such as the Global Financial Crisis (-61%) and the COVID-19 crash (-38%). Yet, markets have consistently rebounded and grown. Staying invested during tough times builds long-term wealth. - Investing beats cash
Inflation erodes the value of cash savings. Investing provides a better chance to grow your money faster and protect its value over time. - Avoid Constant Monitoring
Frequent portfolio checks can lead to worry and impulsive decisions. Stay focused on the bigger picture—your long-term financial goals. - Diversify to Reduce Risk
Spread your investments across assets like stocks, bonds, and real estate. Diversification reduces risk and ensures steadier returns.
The above chart tells the story: crises are temporary, but growth is enduring. Stay invested and trust the process!
(Contributed by Anjeeta, Financial Planner, Team Vikrant, Hum Fauji Initiatives)
What did our clients ask us in the last 7 days?
Question – Why do I keep getting asked to fill out risk profile questionnaires by my financial advisor at Hum Fauji? How does my risk tolerance really impact my investment strategy?
Our Reply – Imagine stepping onto a roller coaster without knowing how thrilling—or terrifying—the ride might be. That’s what investing without risk profiling feels like!
To keep your financial ride smooth and enjoyable, regulatory bodies like SEBI mandate investors to update their risk profiles every two years.
Your Personal Investment GPS
Risk profiling acts as your financial compass, guiding your investments based on your comfort level with market ups and downs. Here’s why it’s a big deal:
- Customized Game Plan: Your risk profile shapes a strategy that aligns with your financial goals, ensuring a balanced approach between returns and risks.
- No Nasty Surprises: Knowing your risk tolerance sets realistic expectations. Whether the market soars or dips, you’re prepared.
- Better Decisions, Even in Chaos: In tough times, your risk profile equips your advisor to steer your investments with confidence.
How Does It Work?
Think of the questionnaire as a personality quiz for your money! It factors in:
- Your financial goals: Are you saving for a dream vacation or your child’s education?
- Time horizon: Is this a sprint or a marathon?
- Risk tolerance: How much market turbulence can you handle?
Your answers determine a risk score, which helps craft an investment mix that suits you.
The Takeaway
Next time you’re handed a risk profile questionnaire, embrace it as your ticket to a safer and smarter financial journey. After all, every great adventure starts with a little preparation!
(Contributed by Team Vikrant, Hum Fauji Initiatives)
