Once you develop an investment plan you have got to stick to it. Asset classes, especially equities can move wildly based on political, global and other news. Having discipline while investing will benefit. It also means staying away from a potential investment when the risk / reward are unfavorable. It is the deciding factor between the investor’s success or failure to reach his or her goals.

Diversify: The first and most important rule is to diversify your investments across asset class. One must not put all the eggs in one basket. A certain percentage should be invested in a variety of assets, such as large-cap or large, mid-cap and small-cap stocks. Put a percentage in real estate, gold and fixed instruments. And yes do hold some part in cash too. Though the risk arising from economic factors would remain, the unsystematic risk, which is unique to the asset class, would be reduced. The principle of diversification involves investing across options so that losses in some will offset gains in others, thereby reducing the variability of return. It is a risk management technique. The rationale behind this technique is to yield higher returns and pose a lower risk than any individual investment found within the portfolio.

Dollar Cost Average: In other words, this is known as systematic investment plan. This is a very useful tool especially in volatile times. By buying an equal amount each period, one can end up with a cost basis that is close to the average over that period. It is a plan which can offer a disciplined, systematic approach to investing that could be the cornerstone of your long-term planning. As seen from the table, SIP investing does benefit in the long run.

Discipline: Once you develop an investment plan you have got to stick to it. Asset classes, especially equities can move wildly based on political, global and other news. Having discipline while investing will benefit. It also means staying away from a potential investment when the risk / reward are unfavorable. It is the deciding factor between the investor’s success or failure to reach his or her goals.