How Being Lazy Makes You a Better Mutual Fund Investor?

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The famous scientist Thomas A. Edison has said that there is no substitute for hard work. Well, yes! He was right considering several cases in life. However, when it comes to investing in mutual funds, the saying doesn’t always stand true. Here’s how we are going to explain you why being lazy actually helps in investment, thus offering better returns on investment. So without any further ado, let’s get started!

Lazier = Better Returns. How?

From the time we were born, we are taught that making constant efforts is what get you towards your goal. Most of us carry this attitude to our investments as well. With the greed to make the best of portfolio and earn the highest possible returns, we often take prompt actions. How much did I made today? How much return the fund has given? Is my fund performing the best in the category? All these questions lead to the need of taking an action when you invest in mutual funds.

People who are always planning on making moves in mutual fund are the ones who end up with the worst returns. The market is down, what should I do? The scheme is underperforming, should I switch? The market has risen so much, should I book profits? Unfortunately, such a quest for taking actions has the potential to do the greatest harm to your mutual fund investment.

Note: Ace investor Warren Buffet goes to the extent of saying that investors should make their investment decisions assuming they will get only twenty opportunities to buy stocks in their lifetime. This need to be selective in action fuels tremendous discipline in the process.

Other Areas of Life Vs Mutual Fund Investment

When we talk about other areas of life, being proactive can actually help in the progress. However, mutual fund investments do not require active management of the portfolio from your end. These is because there are fund managers who are actively managing the schemes you have invested in. They book profits whenever required and snap up new opportunities of growth every now and then.

Besides, it’s the nature of the market that the impact of any particular event does not run for long. Trying to act on every small event of the news often leads to making incorrect decision, thus less returns in the long-term. There are times when a particular market news may seem to bring in significant effect, but in actuality things do not turn out to be as predicted. In reality lesser number of decisions in mutual fund market means less chances of making wrong decisions.

Earlier this year, there was an impact on the market when the US withdraws from the Iran nuclear deal. It was expected that it will lead to surge in oil prices, for Iran being a major oil exporter in the country. The decision led the markets to react negatively, but it was just for a short term. Oil prices did not surged with a considerable difference, and right after hitting $80 billion per barrel on 25th May, it came down below $75. Stock market also fluctuated, but it didn’t fell much. If you reacted to that news and changed your invested expecting the fall in the market, then you would have been disappointed.

Why Lazy Investors Should Invest in Multi Cap Mutual Funds?

Lazy investors often look for mutual fund products where they can remain invested for long without adding on the risk to their portfolio. They are too damn lazy to track the market and act accordingly. Thus, a smart option is required where both asset allocation and rebalancing are taken care of by the experts. The solution lies in multi cap mutual funds.

The biggest plus point of a multi cap scheme is diversification. The asset allocation is done in three major classes, thus the schemes tends to be less volatile and ensures a smooth ride for the long-term investors.

What Should Lazy Investors Do and How?

Ultimately the act of choosing a mutual fund scheme relies on the fact that only the asset allocation which is in sync with one’s risk profile and investment horizon can take him/her close to their set investment objective. For instance, conservative or risk averse investors should avoid investing in schemes with have high equity exposure. The investment horizon in multi cap mutual funds should be at least 5 years. Also, only if you have invested across the market cycles, then the benefit of rebalacing will be reflected in your portfolio. There is no comparison with the returns of multi cap funds with the returns of the best performing category of the day.

Read: Top Multi Cap Funds to Invest in Now