Investors should focus on building a diversified, well-structured investment portfolio that aligns with their risk profile and long-term objectives, says Satyen Kothari, Founder & CEO, Cube Wealth.
In an interview with MintGenie, Kothari said how investing your mind without a clear plan and due diligence can lead to poor decisions, excessive risk-taking, and significant losses.
Edited Excerpts:
Q. Mutual fund houses are launching new innovative products in the market. How should investors gauge which of these products suits their investment needs in the long run?
To determine which innovative mutual fund products suit their investment needs in the long run, investors must first define their investment objectives, risk tolerance, and time horizon. They should also research and analyze the new products' features, fees, past performance, and asset allocation strategy. Seeking the advice of a qualified financial advisor can also help investors make informed decisions based on their unique financial situation and investment goals.
Q. The fastest way to create wealth is to go slow. How well do you resonate with this view?
Going slow is a wise strategy when it comes to creating long-term wealth. Patience and discipline are key to investing success, as they allow investors to benefit from the power of compounding over time. Rushing into investments without a clear plan and due diligence can lead to poor decisions, excessive risk-taking, and significant losses. Therefore, investors should focus on building a diversified, well-structured investment portfolio that aligns with their risk profile and long-term objectives.
Q. Many people find it difficult to retire early. What impedes them from achieving financial independence early in life?
Several factors can impede people from achieving financial independence and retiring early, such as inadequate savings, high debt levels, low investment returns, and unexpected expenses. Moreover, lifestyle inflation, lack of financial literacy, and underestimating retirement expenses can also contribute to the problem. To overcome these obstacles, individuals should adopt a disciplined approach to savings and investing, live within their means, seek financial education, and plan for contingencies. The key is to start “NOW” whenever that may be for you.
Q. Most investors cannot allocate their earnings to investments adequately. How do you advise the right asset allocation to your investors?
Asset allocation is crucial to achieving a balanced and diversified investment portfolio that aligns with investors' risk tolerance and financial goals. We advise our clients to follow a strategic asset allocation approach based on their investment horizon, risk appetite, and financial situation. This involves diversifying their portfolio across asset classes such as stocks, bonds, real estate, and commodities while rebalancing periodically to maintain their desired allocation.
Q. New-age investors are now planning for retirement early in their careers. What is the first step to retirement planning that you endorse?
The first step to retirement planning is to define one's retirement goals, such as the desired retirement age, lifestyle, and expenses. Investors should also assess their current financial situation, including income, savings, debt, and investments, to determine their retirement readiness. Developing a retirement plan that includes regular savings, proper asset allocation, and contingency planning can help investors achieve their retirement goals early in their careers.
Q. Money is not wealth; wealth is not money. Yet, one cannot be defined without the other. How would you tell people to take care of their money while advocating wealth creation?
Money is a means to an end, while wealth represents a holistic and long-term perspective of one's financial well-being. To take care of their money while advocating wealth creation, individuals should prioritize financial planning, budgeting, and saving, while also investing in their education, health, and personal growth. Building a diversified investment portfolio, avoiding excessive debt, and seeking professional advice can also help individuals grow their wealth over time.
Q. Money is getting devalued rapidly owing to the rising inflation rate. Keeping this in mind, how should you calculate your ideal retirement corpus?
Inflation can erode the purchasing power of retirement savings, making it essential to calculate an ideal retirement corpus that factors in the impact of inflation. Investors should consider their expected retirement expenses, inflation rate, and investment returns when estimating their retirement needs. Seeking the advice of a financial advisor and using retirement planning tools can help investors calculate a realistic retirement corpus and develop a plan to achieve their retirement goals. Overall, investing in the stock market is the best way to tackle inflation as long as you are able to identify companies that grow at the same rate or faster than inflation.
