Random Decisions Can Derail Systematic Investing

If you have too many funds in your portfolio, you must realise that mutual funds themselves are a diversified investment vehicle and hence having too many similar funds doesn't help in any which way

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Hemant Rustagi Chief Executive Officer, Wiseinvest Pvt Ltd.

Systematic investing, through SIP, brings a discipline into your investment process. Since you commit to invest a fixed sum on a fixed date in a pre-decided fund, you become an unemotional investor. In other words, when you invest in equity funds through SIP, you save a part of your income every month, avoid timing the market and benefit from averaging. And if you stay committed to your time horizon as well, you can tap the true potential of equity and benefit from the power of compounding.

While there are merits of following this potentially rewarding approach, it is equally important to follow the right investment process. Remember, a random approach can either expose you to unwarranted risks or disappoint you in terms of returns. Simply put, you won’t achieve your investment goals by investing a random amount that is either not enough to achieve your goals or exceeds your capacity to invest, thereby compelling you to disrupt your investment process. Another important aspect in this process is asset allocation.