A simple Do It Yourself (D.I.Y) investment framework

In the first five blogs we outlined a simple investment paradigm. Putting it all together, one can setup a simple yet effective strategy that should not take more than 2 hrs of your time every month. Here it is in few easy steps

  1. Invest every month. Waiting costs money, not investing costs even more money.
  2. Invest for the long term. Do not invest money that you may need in the next two years.
  3. Every month calculate your surplus income as excess cash (savings, FD’s etc) over and above your annual expenses. Invest your surplus income.
  4. Of your investment corpus buy (110 – Age)% in equity mutual fund and remainder in bond mutual fund. For example if you are 30 years old, buy 80% in equity mutual funds and 20% in bond mutual funds. Choose index funds with the lowest annual fees.
  5. Rebalance your portfolio every two years to be (110-Age)% in equity mutual funds and remainder in bond mutual funds.
  6. Buy a residential house once you have sufficient wealth for at least a 20% down payment.

And most importantly, stay true to your investment plan. Ignore financial media and the calls of both boom and doom. Discipline is your biggest strength.

There it is – a simple D.I.Y investment strategy. Of course it has quite a few drawbacks; most importantly it does not take medium and long term goals or an individual’s risk appetite into consideration.

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