Mindful Investing in the Age of Information Overload

In this age of technology and quick-reach, one gets bombarded with News, Views, Research, Outlook, Recommendations, Tips, Podcasts, Reels, Infographics on a daily basis. While having a problem of plenty is still better than lack of information on investing - as was the case 2-3 decades ago – it is still a challenge for investors to cut the clutter and make sense of what really is happening.

Investors could practice mindful investing in today’s world by following few basic steps

Have a Financial Plan

Without a financial plan linked to your financial goals, there is a higher likelihood of you adopting a reactionary approach to any news/views. During market corrections, it is easy to come across news/views which could create fear in the mind of investors. Instead of using such corrections as buying opportunities, investors end up redeeming their investments.

A Quick look at the table shows how short term corrections were followed by sharp recovery after some key events.

Select Appropriate Investments as per your financial goals

By selecting the right products for your financial goals, help reduce the propensity to chop/churn the portfolio during intermittent market volatility. For instance, if you have a financial goal within the next 3 months and you have invested in an Equity Fund, it is but obvious that any negative news flow in the market is bound to rattle you.

Use the right sources of information

Consider only few trusted sources of information and differentiate between facts and speculations. Avoid acting on recommendation from self-proclaimed ‘Market Experts’ on social media.

Avoid chasing trends

More often than not, much of financial advice available online highlights trending themes/sectors/asset classes. While knowing what’s trending doesn’t harm anyone, acting on such momentum plays could be detrimental.

Review portfolio regularly, but not frequently

Set up periodic reviews of your investment portfolio (quarterly or semi-annually). Constantly checking your investments in reaction to every piece of news can lead to overtrading or unnecessary anxiety.

Consult a Professional

Taking help of a trusted professional make sense of what’s happening in the financial markets and more importantly ensure that you do not stray away from your financial plan.

Focus more on getting the basics right instead of fixating on fancy macro-trends

Before you get bogged down by jargons like Yen-Carry trade, Inverted Yield curve, Shiller P/E Ratio, Real Effective Exchange Rate etc. aim to get the basics right. Understand how different asset classes work, what are the different types of Mutual Funds/ETFs, how they are different from FDs, importance of asset allocation, Goal-Based investing, SIPs, STPs, SWPs, taxation of different products etc.

SIP - Systematic Investment Plan, STP - Systematic Transfer Plan, SWP - Systematic Withdrawal Plan

Taking the SIP route for investing

Events that have impacted the markets :

Relevance of these events for a long term SIP investor?

Not Really*

*SIP allows auto-investing at predetermined interval in the relevant schemes for an investor. This helps investors to stay invested for the long-term, which reduces the impact of short-term volatility induced in the markets due to various macroeconomic events and other news

In the world of finance, especially in equities, it could be safe to say that in the short run, no one has a clue. So, reacting to alarming news in the short-run doesn’t really help. An investor is likely to be better served by sticking to a financial plan, without worrying about every single development around the world.