Skip to main content

The Contrarian Rules of Investing & Managing Money

How often have you followed investing principles to the hilt only to fall short of expected returns? How many times have you imbibed investing logic to rue over its failure?

While rules decidedly set you on the road to success, it's foolhardy to snub your own rationality. Often, our hard-earned money fails to multiply at the rate we want because of the knowledge base we have built over the years and our blinkered approach to investing.

 

Sometimes, adopting a different approach to the norm can be more profitable. Here are some strategies that are contrarian to the ones popularly espoused. These can work for you, but keep in mind that just as with other strategies, these too require study and due diligence.

Concentrate on your portfolio: Most readers think of portfolio diversification as a wealth creation technique. Actually, it's a risk reduction tool utilised to preserve wealth.

This doesn't diminish its importance. In fact, diversification is essential. However, some of the largest fortunes in the world have been created by 'focused' investing. Azim Premji, Ratan Tata and Bill Gates have all increased wealth by concentrating their funds, not by diversifying them.

So, if your portfolio is doing well, it's a good reason to buy more stocks of the companies that you own. Suppose you had bought 100 shares of Tata Power in 1995, the consistent performance of the company can be an incentive to add more of the same.

Ignore some rules: Most finance students have been taught the '100 minus age' thumb rule to calculate the amount that should be invested in equities. However, aggressive investors often ignore it. They usually have a set percentage of debt amount in their portfolios.

Though they keep putting in small amounts and rebalancing their portfolios to maintain this figure, they invest heavily in equities. For instance, an investor can put an amount equivalent to his expenses for the next 10 years in debt instruments. Any money invested after this can be routed to the stock market.

Get rid of niche plans: Specific policies, such as child plans, pension plans, etc, are, at best, sub-optimal. For instance, if you want to build a corpus for your child's higher education, instead of putting money in a child plan from ICICI Prudential Asset Management Company, invest it in the ICICI Prudential Dynamic fund, which will deliver better returns.

Get an adviser: This is probably the most important investing approach you can adopt. Many people believe that taking financial advice from parents is enough. It's also natural as we've turned to them for their opinion throughout our lives.

However, if your parents haven't managed to amass a lot of wealth through their investments, they are probably not the best people to approach in this regard. What you need is a competent and unbiased person to help you plan your finances. So, get an adviser and ensure that he understands your financial goals.

Don't prepay the home loan: Most of us prefer to opt for a 20-year home loan while buying a house so that we can pay the equated monthly instalment (EMI) comfortably. When our income increases subsequently, we tend to be in a hurry to repay the loan.

This is not a good strategy. If the long-term returns from equities are much higher than 8% a year, why should we prepay the home loan? It makes more sense to keep paying the EMI and, at the same time, investing in equity SIPs. In the long run, this can make a surprising difference to your portfolio.

Avoid the Public Provident Fund: The PPF isn't a profitable avenue for everyone, especially young investors. If they want to invest in a secure long-term instrument, a better option would be an index fund. Over 16 years, the fund would deliver much higher returns than the PPF.

Surrender policies: For some people, it's anathema to admit they've made the wrong decision and bought a bad policy. So they continue to suffer. In most cases, it's better to take the losses, mentally and physically, and reinvest in another option.

Don't go for gold: Reduce participation in the futures and options market, realty market and gold. These are good avenues for investors who are highly experienced, traders who are willing to take high risks or professionals in these fields.

They know the tricks of navigating and profiting in these markets. Retail investors should avoid these complicated areas, including property speculations. However, if they are keen to build a commodity portfolio, they can invest in a couple of products.

 

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now