Oratory skills, unrelenting determination, organisational capabilities, electoral machinations… there is a lot one can learn from Narendra Modi. But the Prime Minister also has something to offer to small investors. In the six weeks that he has been in office, Modi has demonstrated many qualities that could make you a better and, perhaps, richer investor. We look at five things that small investors can learn from him. Irrespective of whether you voted for his party, you could follow these these principles and reap benefits from them.
UNCLUTTER THE PORTFOLIO
Modi dislikes clutter. No bundles of files gathering dust, no broken furniture piled up in the corridor. He made this clear to the babus at South Block when he assumed office. Even the presentations should not be lengthy dissertations. The Prime Minister wants just 5-6 bulleted points that pitchfork the relevant issue to the forefront. Likewise, your portfolio should not be an unwieldy mix of random investments. One should not have more than 10-12 stocks in the portfolio.
If the portfolio is very large and requires diversification, take the mutual fund route. Here again, do not invest in too many funds. Experts say 4-5 diversified equity funds, 1-2 bond funds and a gold fund should be enough to create a well diversified portfolio. Buying 7-8 funds of the same category only duplicates your holdings and does not lead to diversification. Besides, too many funds clutter your portfolio and make it difficult to monitor. If you don’t know how your investments are doing, you won’t be able to remove the underperformers.
BE SYSTEMATIC AND DISCIPLINED
The Prime Minister is a meticulous planner and follows a disciplined regimen. These are qualities that small investors should emulate. If you plan your investments, you will be able to achieve your goals much easily. Chart out the roadmap for different financial goals and start investing for them in a systematic manner.
As any investor would know, the systematic investment plan (SIP) is a convenient way to create wealth. SIPs are not only for the long term. You could be saving for the down payment of your house 15 months away or for your child’s college education three years from now. The key is to maintain discipline and continue investing till you reach your goal. It’s a simple practice that can help you a lot in the long run.
BE RUTHLESS WITH UNDERPERFORMERS
One of Modi’s most noticeable traits is his intolerance of slackness. He wants to ensure that all ministers and babus are on their toes and work is executed efficiently. Simply put, there is no room for laggards in the Modi portfolio. Like Modi, investors too should be ruthless when it comes to underperformers.
Don’t dump a fund based on the performance over a short span of time. But if your fund has been consistently underperforming, it won’t be a good idea to keep it in the portfolio. Move out if the scheme performs poorly compared to its peers and the benchamrk over three to four quarters. Similarly, don’t keep underperforming stocks in your portfolio forever. The current upswing in stock prices is a golden opportunity to get rid of stocks that don’t have very bright prospects.
KEEP YOURSELF UPDATED
Modi is very tech-savvy and likes to keep himself updated with domestic and international developments. Within minutes of any major event, you can expect a tweet from the Prime Minister. Small investors should also keep their eyes open and ears to the ground. This will help them align their portfolio with what is happening in the market. For instance, gold has always been seen as a safe haven. But the metal has lost sheen in recent months due to global developments and fluctuations in the currency market.
An alert investor would have caught the trend and disgorged his gold holdings when the metal was on a high. Similarly, keep track of the stocks and sectors you have invested in.
DON’T LET NOISE DETER YOU
Despite heavy criticism from opposition benches, Modi has pushed through some harsh decisions in the past few weeks. The hike in rail fares may have hurt him politically but it is a sound decision financially. Investors too should not be deterred from their financial objectives due to the noise from friends, colleagues and financial salesmen masquerading as advisors. Do no let shortterm volatility turn you away from the equity markets. Similarly, don’t let marketing gimmicks lead you to invest in sub-optimal schemes that don’t fit into your overall financial plan.