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Slow and steady: way to stronger portfolio

india Updated: Nov 06, 2008 02:46 IST
Arnav Pandya
Arnav Pandya
Hindustan Times
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Never invest all your eggs in one basket, is a golden rule that is being repeatedly drummed into the investors’ psyche. The rule also holds true for those who want to invest all their hard-earned savings in the equity market at one go.

It is always advisable to purchase shares of different companies in small lots, which ensures that the investor has a longer time period to complete the process of investing their funds. Investors should also be clear about the method of completing this process so that there is no confusion over what they are investing and where.

The philosophy

Investors today are confused over whether they should or shouldn’t invest in a market where the bulls and bears are fighting for supremacy. It has also resulted in confusion over the manner of the investment. At such times the idea to invest in equities should be a lot like investing in mutual funds where an investor can look at putting money through a systematic investment plan (SIP). Taking this route can help the investor to complete his or her investments in a simple and systematic manner.

Think long-term

Just ensuring that investments are made in small lots will not complete the process. The time-period over which these investments would take place is of utmost importance. The longer an investor is able to continue the better it is because this will ensure that there are more chances to buy and hence give some stability to the investment process. A word of caution though—only those who are able to invest regularly should do investing in small lots. Such investors also need to be well versed with the market and its way of working. Having longer investment ability will be a great help in the process.

Get systematic

It may not always be possible to get the market lows. However, purchasing a fixed amount in different equities at different time periods will help the investor to purchase equities at different price points.

The selection of stocks though has to be right to ensure that there is a profit when the market rises. To do this, invest in good and fundamentally sound scrips. Over a time frame of a few years this will help in building a good portfolio.