Investing your own hard-earned money in funds is almost always exposed to the company of emotions. After all, no one wants to lose their savings.
INVESTING IN FUNDS MISTAKES – MISTAKE ONE: The same strategy for the entire portfolio of your savings
We often save money for a specific purpose – achievable in the short or long term: buying a car, buying a house or retirement. As we will buy a new car maybe next year, a house in 15 years and retirement is still only a small point on the horizon of our lives. By taking these differences into account, we can choose different strategies to optimize profit and risk.
CONCLUSION: for each goal, develop such a strategy (potential profit, risk, diversification) so that the result is as satisfactory as possible.
INVESTING IN FUNDS MISTAKES – MISTAKE TWO: Saving without a specific goal and horizon
In order to choose the right strategy, we should know why and why we trade our money. Knowing the purpose of our actions, we can choose the right horizon and consciously decide to end the investment when the goal is achieved. We can also choose an optimal strategy. With investments for a longer period, we can initially take more risk to be able to count on a potentially higher profit. For short-term investments, it is better to choose funds that are less subject to market fluctuations, where we can count on a potentially lower profit.
CONCLUSION: if you set yourself what you will invest for and for how long, it will be easier for you to manage your portfolio and the results will be more satisfactory.
INVESTING IN FUNDS MISTAKES – THE THIRD MISTAKE: SUCCUMBING TO THE MEDIA NARRATIVE
Investment funds are subject to, among other things, a distribution fee – usually charged at the time of purchase of participation units. A temporary decrease in the value of our investment is not a reason to redeem our units and expose ourselves to this fee when buying new ones.
You should also not worry too much about media messages. The specificity of the media’s operation forces the selection of information and the provision of the most popular information. In addition, there is a saying in the investment world that if television talks about something, the valuation of financial instruments most likely already takes into account the effects of these events.
CONCLUSION: The so-called “cool head” is an extremely important thing when we want to invest money responsibly.
INVESTING IN FUNDS MISTAKES – MISTAKE FOUR: Applying the current situation to a longer term
This is a typically human tendency: assuming that if things are good now, there is no need to protect ourselves for the future, because it will also be fine. The financial market is constantly fluctuating. The results achieved by TFIs at the time of publication are historical and cannot be used as a hint that a given fund will also perform similarly in the future.
When choosing participation units, we should take into account the parameters appropriate for the type of fund in which we want to invest: economic growth indicators, unemployment, economic sentiment expressed by PMI (equity) indicators or in the case of debt and money funds: changes in the interest rate and prospects for changes in inflation rates.
CONCLUSION: The financial market is constantly fluctuating, and every investment involves the risk of loss. A cool head can minimize this risk.
INVESTING IN FUNDS MISTAKES – MISTAKE FIVE: Forgetting about diversification
It is a grave sin – fortunately, it is committed less and less often. Keeping your funds in one fund is dangerous. Sudden problems in the market where our money is invested can lead to a serious loss in our portfolio. Therefore, it is better to diversify funds into different sub-funds, different markets or different risk classes.
CONCLUSION: dividing a large investment into many smaller ones can save your money.
If you are interested in investing in investment funds, check out the sub-funds offered by Caspar Parasolowy FIO. Possibility to start from as little as PLN 1,000 – investment funds.
If you have at least PLN 25 million and are looking for the most secure and personalized, and at the same time bringing a number of benefits (tax reliefs, transparency, anonymity and others) tool – check out the offer of Caspar TFI SA – a closed-end investment fund.