The Buyt Desk
Investors are not sure if they have to chase returns or inculcate and concentrate on investment discipline. Let us know what is important in this article.
It is natural for investors to chase returns. People think that to reach financial goals in the planned time frame, chasing returns is the only way. Till they realise that this is the wrong approach it is very late. A structured goal and a good strategy to achieve it is the best way to reach your financial goals. Financial discipline is most important so that you can stick to the planned strategy.
How important is Investment discipline?
Financial plans and investment discipline may be emotionally draining but do not deviate or go easy on discipline. It is not going to be easy to stick to a plan all the time but you can embrace the way that will help you discipline your investment routine and keep everything in check. You should have a mindset to invest regularly no matter what and put in constant efforts to reach long-term financial goals. Irrespective of your profession, gender and business, you should follow financial discipline. You need to put effort into not being emotional when making financial decisions.
What is successful investment management?
When you are able to do investments as planned, on time and manage it without much deviation, in the long run, is called successful investment management. Long-term fundamentals should be given importance and this is a systematic approach to maintaining full investments and rebalancing them. All this put together is known as investment discipline.
By removing emotions while making decisions about investments you will be able to achieve your long-term financial goals better. For your financial plan to be successful you have to manage your portfolio well at all times. When times are good do not ignore investment and go extravagant, discipline is important both in good and bad times.
Investors can easily find their way through market volatility and even confidently navigate through unpredictable market conditions if they have investment discipline. Investment discipline can secure investors’ long-term financial plans. Basically investment discipline demands
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focusing on long-term fundamentals
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keeping emotions out of the process of investment decision making
Why are investors so passionate about returns?
Greed and fear motivate investors to be passionate and obsessed about returns. When the markets are going up their greed empowers them. Similarly, when it is going down, investors get cold feet because of fear of losing money. Investors obsessed with returns fall for greed and fear. And they are passionate because they think that only chasing returns will take them nearer to financial goals.
Yes, the purpose of investment is to get good returns but chasing it will not give good returns. That would be a very wrong approach to achieving financial goals. Financial goals depend on your plan for life and based on this you should plan investments. Returns from investment help to achieve various objectives in life.
Why chasing returns is not a good practice?
In reality, you can neither achieve your financial goals nor have better portfolio returns by just chasing returns. Investment discipline is what will take you closer to goals and help you achieve them. Your investments are made to achieve various goals at various junctures of life. When you know your life goals well you can plan your financial goals and achieve them through investments. This will tell you your risk-taking capacity, earning abilities, liquidity needs, time that you have for investments and many more. Get your asset allocation right so that you can achieve your goals at the right time. You should look at overall portfolio returns and not individual assets.
Summing up
Yes, investment returns are important but chasing returns is not the right way to invest. Returns are good only when money is invested properly with discipline maintained. If investment discipline is maintained then easily most can get an overall modest 9% portfolio return. Now that we know investment returns are not the one which needs our focus but discipline is. To make sure your life is well funded and financial goals are met on time, you need to make disciplined investments, proper asset allocation and periodic reviews.
Happy investing!
