Understand the associated risks and the investment horizon before putting in your money

We can create our own investment solutions made of different products that may have differentiated risk-return profiles but will eventually lead to a tailor-made portfolio that suits our investment objective and risk appetite

“ज़रूरतें जैसे अनेक हैं, बस वैसे ही पृथक- पृथक है योजना।

जोखिम-लाभ-मियाद समझे बिना, कीजिए कोई निवेश ना॥

Translation: ‘Schemes are different, so are investors’ need & their taste.

Without Understanding the in-built trade-off, don’t invest.’

The earth rests on the head of Shesh-Nag, the thousand-headed serpent and king of all Nagas as per Indian mythology. The shifting of the earth from one head to another causes an earthquake, goes the legend.

Do you believe it? Do I believe it? The answer is an emphatic No! Then what’s the use? It is a pertinent question that can at best be answered partially. Let me give it a try.

The usage of mythological stories lies in the eternal truth they reflect upon. Any individual who sees glimpses of the eternal truth through these stories can live life to the fullest.

Now coming back to the story-When Shesh Nag was mandated to carry earth on its head, the serpent king appeared sad. The Lord asked the reason for the gloominess on his face. The serpent king replied ‘I am stressed with the thought of how long I would be required to carry earth on my head. There must be a deadline’.

The Lord understood his dilemma and said, “Ok! I will manifest myself in many forms on earth. You go on chanting my names and the day you find two entities identical in all respects; your job is done.” As the mythological story states, the Shesh-Nag has been chanting Lord’s names from his thousand mouths since the beginning, waiting for two identical entities but to not much of success. He never complains because he hopes that someday Lord’s creativity would be done, and he would be relieved of his duty.

We can learn two important aspects from this story: i) every individual is unique ii) hope is what keeps everyone running.

Of course, no human being can even dream of coming anywhere close to god’s creativity and customize anything to everyone’s unique traits; but there are several aspects of our life when, knowingly or unknowingly, we customize things to suit our comforts and aspirations.

This spirit is also needed when it comes to investments. Just like the recipe of our favourite food that comprises of individual ingredients and spices that come together to create that unique flavour which our taste buds’ savour – we can create our own investment solutions made of different products that may have differentiated risk-return profiles but will eventually lead to a tailor-made portfolio that suits our investment objective and risk appetite.

The thumb rule in investments is ‘one size does not fit all’. When it comes to investing, nothing will pay off more than educating oneself. Understanding the inherent risks associated with the products and whether they suit your objectives is the key to a successful investing experience.

Differentiated objectives need suitable plans/ schemes. Never make an investment without understanding the associated risks and the investment horizon.

To that end, it is pertinent to know a few things before you start your journey as an investor.

Articulate investment objectives: Half the battle is won when you are able to clearly define the different investment objectives that you have.

Treat each of these objectives as an independent portfolio in itself. Yes, it is your money at the end of the day – but under no circumstances must you dip in to one portfolio to fulfil the objectives assigned to another portfolio, inculcate strict discipline to ensure this.

Be disciplined: Don’t give in to interim temptations and fears, trust the process and be assured of positive results. Brace yourself through volatilities that are inherent to the asset class in which you have invested, so that you can enjoy benefits of compounding in the long run.

At the end of the day – it is the key to celebrate our uniqueness in every aspect and design a world that fits our needs, especially in investments and otherwise.

For the convenience of the readers, I give below a table indicating broader categories of investors, corresponding categories of schemes, and advisable time horizon.

sr no Category of investors Suitable category of schemes Advisable time horizon

1 Conservative Debt Till maturity in case of target maturity schemes; and matching with duration in case of open-ended fund

2 Moderate Hybrid 3-5 years

3 Aggressive Equity Beyond 5 years

4 Goal-specific Solution-oriented schemes Matching goal timing

The above deliberations and the illustrative table are aimed at introducing concepts at very basic level. Our purpose is to whet readers’ inquisitiveness and curiosity. They are advised to contact professionals before investing.

(The writer is Executive Vice-president, SBI Funds Management Limited; Translation an content by Nithya Jagannath, Vice-president and Head of products, SBI Funds Management Limited)