Track & Monitor | Value Research An investor cannot afford the invest-and-forget approach if wealth creation is their goal…
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An investor cannot afford the invest-and-forget approach if wealth creation is their goal…

I am a long term investor and can hold investments for ten years and more. Funds recommended by you keep changing over the years hence are not good bets for long term and in case of Index funds; the returns do not look good in the long run. I am confused on what strategy to adopt when investing.
- Pooja B. Chainani

Investing is all about discipline. Whether investing for the short-term or the long-term; invest and forget approach is something that you cannot afford for wealth creation. You are right with your observation that fund performance changes over the years, that is why a fund which is a top performer currently need not be so a few years later. For a long-term investor, you need to track, monitor and evaluate your investments and align them to achieve your financial goals. You also need to invest regularly and systematically through SIPs.

We suggest, you go with a core and satellite approach, which will give your mutual fund portfolio the necessary stability and growth for long-term wealth creation. The core holdings should comprise of steady funds such as large- and large- and mid-cap funds. You should consider holding a few categories of funds that have the potential for quick growth, but are volatile such as mid- and small-cap funds as well as sector funds making the satellite component of your portfolio. This way, you will have a sound portfolio with overall growth possibilities.

On index funds; the returns purely depend on the movement of the index you have invested in as the investments follow the same weightage and same companies that constitute the index. These are suitable for passive investors who do not have the time to track the performance of their funds regularly which are actively managed. The returns are not as high as compared to an actively managed fund because which is the cost of being passive that one pays for.

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