If you are a new investor, how are you sure enough that you will earn more than the index?
I think you should put your ability to test first by investing some amount in mutual fund and some amount in stocks of your choice over atleast one bear and bull cycle.
SOIC tells us to test our ability at least for few years in comparison with the mutual fund.
For reference, I currently invest only 25 percent in direct stocks, because I am not completely confident of my ability. I have recently decided to increase that percentage. I have started investing in mutual funds in the late 2019. Direct stock investing in mid 2021.
How do you know that a mutual fund NAV is at all time high?
Except maybe smallcap mutual funds, being tactical in mutual funds does not help much.
My selection criteria for a good mutual fund for your reference →
- AUM is not too high
- Managers is good and can invest in all caps
- Change in AUM due to fresh money is not high as there are not many good ideas every month to invest into.
- Low beta(should not take too much risk) when compared to the alpha
I prefer the Parag parikh tax saver fund.
Refer to this → https://www.valueresearchonline.com/stories/46232/sips-and-the-temptation-to-time-the-market/
In even psychology of money, it is written how by regular SIP you can get a better returns than timing your SIP.
Finally to your question
You will learn it in your journey and it is investor dependent.
For reference, I like keeping my SIP on until and unless, I see some opportunity and skip my SIP to invest in direct stocks that month.
I have also planned to keep less than 10 percent in fixed assets to invest in company directly when I don’t find many good ideas and to keep the allocation to direct stocks at least to the minimum defined.
Disclosure – I can be too stupid at times and take this advice with the pinch of salt and sugar maybe.
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