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Track portfolio and realign it for better returns

The domestic investors are increasingly realising that it takes a combination of timing, patience and probably little bit of luck to make money from the stock markets. Those who missed the opportunity of booking profits during the earlier boom run are regretting, and even those who made an entry less than a year ago are not a happy lot. That is sure to make many wonder what it takes to be an investor in the stock markets.

Check out if you have these traits.

Risk appetite

Equity sure lets you earn more money but not all your investments can turn into a goldmine. This is particularly true when you bet on stocks. As a result, an equity investor needs to have the ability to take risks which could be in the form of negative returns. While the prospects of loss of capital are much lower when the investment horizon is long, there are chances that some stocks may not recover even in the long term due to a change in their business prospects. In such cases, 'stop loss' becomes a strategy and investors may be forced to settle for loss of capital. As a result, equity is definitely not an option for those who can't see negativity in their portfolio.

Time to monitor

If you are one of those jet setting professionals with little time on your hands for managing money, equity investing is not the option for you. The stock markets are all about volatility and hence need careful analysis and monitoring. When you take the direct stock route, investment decisions need to be reviewed regularly. Gone are the days when you could invest in a stock and relax. Today, even market leaders are faced with the challenge of business cycles and hence, investors have to keep a tab on macro and micro factors.

For those who don't have the energy and time for regular monitoring, mutual funds may be a better option as the money you invest is managed by professional managers. Since mutual funds also take care of the diversification aspect because of their larger portfolios, the investor gets the benefit of better returns. Though in the short term, direct equity investing may prove beneficial, history has shown that mutual funds have the ability to generate higher returns over the long term because of diversified portfolios. Also, mutual funds have the advantage of holding on to cash unlike individual investors.

Stick to your conviction

It may sound contradictory but equity investors need a combination of conviction and nimble footedness to maximise gains. While the ability to book profits at regular intervals is an integral part of equity investing, an investor also needs the discipline to think long term with his investments. For instance, if you have chosen the equity option for building wealth over a period of 10 years, the aberrations in the short term should not be a constraint. Again, for long-term goal fulfilment, systematic investment plans (SIPs) in equity can do a better job when compared with direct stocks as stocks may not retain the same level of potential over a long term. On the other hand, the SIP form of investing through mutual funds can be more rewarding and less cumbersome.

While these are some traits which can help investors tide over the uncertainties of equity, the basic principle of wealth creation is discipline. Irrespective of your choice of product, be focused with your goals and the means you choose.

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