Many a times we come across people who want products that give the best returns. Is it the right way to choose your investment options? What can be the pitfalls that come along with such a strategy? ‘Best’ return is a relative term. How do you define “best”? There would be parameters in place to benchmark the performance of the product in its own universe. But what about benchmarking it to suitability in your own life situation? With- out this you will end up with a basketful of products which might not be amenable to wealth creation. Sometime back Goldwas performing extremely well and equity has not been the best. So do you put all your money into Gold? What happens when the cycle turns? At that time if you decide to move to equity, you will probably exit gold at a loss and enter equity at higher valuations. So you end up with the worst of both. Another factor that is sometimes overlooked is the risk associated with chasing the best returns product. Each product has a risk-reward equa- tion. Is that suitable to your tempera- ment? You might enter a bond fund seeing that it has been giving good returns over the recent past. But what does the portfolio hold. If it holds higher proportion of long dat- ed government securities, it is going to be extremely sensitive to interest rate fluctuations. That will cause huge volatility. Hence it is a debt fund, but still has substantial risk. The current top per fo rme r might not be so to mor row. Choosing the current top per- formers might have you buying flavour of the season products. In equity people pour in money when the markets are at high levels. But the actual profits are made much earlier when the markets were down. People who invested at lower levels will reap rich returns for their fore- sight. People who follow returns will end up entering at the wrong time and exiting at a loss in search of the next performer. Statistics can be conveniently used to create a picture that the seller wishes you to see. Showing data for Cont… Page 6 Chasing Returns: Is it the right way to invest?Financial Plan Every financial plan is a custom made creation for client taking into consideration his life aspirations, current financial position and last but not the least his money be- liefs. Hemant Beniwal, CFP CM Let a million advisors bloom 2 Detoxify your Investment Portfolio 3 Detoxify your Investment Portfolio- continued 4 Money Matters in Life 5 About Us.. 6 Inside this issue: F L fg F L fg F L fg F L fg A R K F I N A N C I A L P L A N N E R S N E W S L E T T E R Volume 2, Issue 3 July 2013
