Not everyone has the time or temperament to follow market movements all day. For such individuals, a regular monthly investing plan can offer a calmer route into the market. Even a person who casually glances at the IRFC Share Price once in a while can benefit from steady, rule-based buying. In the same way, the RVNL Share Price need not be a source of anxiety if purchases are spread over many months. This article explains how to build a simple, disciplined plan around public sector stocks.

Why Regular Investing Works

Markets are fickle. Unless one is very sure about one’s ability to time the market, systematic investing helps. By investing fixed amounts every month, you are buying more shares when prices are down and fewer shares when prices are up, thus averaging out the cost of your purchases

It takes away the guesswork and helps you avoid the temptation to time the market

Set Goals and Budgets

Decide on a goal and the time frame in which you need the money. The time frame defines your risk profile. A goal that is 10 years away has a greater tolerance for risk than one that is due in 2 years. Given that risk and returns are directly linked, decide on how much you are willing to invest every month without affecting your monthly budget

You must first build an emergency corpus that covers your expenses for at least six months. Make sure you have adequate health and term insurance before you think of investing. Do not overinvest in any one category. Do not touch this corpus in case of any emergency, for that could force you to book losses by selling investments at the wrong time.

Decide on the Amount to be Invested in Public Sector Undertakings

While PSU stocks form an important part of any portfolio, never allocate more than a third of your total equity allocation to this category. Similarly, do not invest more than a third of your equity corpus in any one sector or theme

Diversify across PSU stocks as well as private labels in different sectors-banking, information technology, consumer durables and healthcare.

Execute the Plan and Monitor It

Most brokers offer systematic purchase options. Mutual funds also offer systematic investment plans where one can nominate a date every month when a fixed amount should be debited from one’s account and invested in a chosen scheme. In the case of direct stocks, decide on a date and buy a fixed number of shares every month. Since it is unlikely that one can buy the same amount every month because of rounding off, one should keep track of the number of shares bought every month.

Review your portfolio every six or 12 months. If some stocks have moved up sharply, it makes sense to rebalance your portfolio so that your risk is not skewed

Avoid these Common Mistakes

Do not get tempted to halt your systematic investing because markets have moved up. Systematic investing works best in falling markets. Similarly, do not increase your instalments while buying if the markets are rising. Avoid checking your stock prices every day. This is a sure way to panic and exit at the wrong time. Do not think of taking loans to invest. Leverage works both ways, and if the markets dip, you could face a severe blow.

The Power of Patience

Wealth creation in equities is a long-term process. While it is easy to get disheartened in the initial years, patience is the key to reaping the maximum rewards. By staying invested and by diversifying across sectors, one can reduce risk. Monitoring the portfolio on a periodic basis and tweaking the asset allocation will help meet one’s investment objectives. It is a good idea to go through reports on a company one has invested in once a year. One should also review one’s portfolio if there is a change in one’s financial needs. This article is for informational purposes only and should not be construed as personalised financial advice. Consult a SEBI-registered financial advisor before attempting to implement any of the suggestions mentioned here.

Share: