Investing is quite a tedious and a disciplined process which requires a lot of attention and care from the investor, failing which you as an investor may not get the expected returns on your investments. Our mundane routines make it difficult for us to pay attention to certain details which can have an impact on our investments. In such situations where it becomes difficult to keep a track of your investments as to when and where to invest and when to exit, you can pass on such decisions onto an Asset Management Company (AMC) who later take charge and keep you informed of any required changes that are required to be made in your portfolio.
Utilize the trigger facility which your AMCs provide. The trigger enables you to exit the market as and when your expected returns have been achieved. Also, it enables you to fix a date, price or index level upto which you want to invest and or enter the market into.
The reason why most financial advisors advise this mechanism for conservative investors is because it allows you, as an investor, to inculcate a profit discipline so that you do not become greedy and end up making wrong decisions when the market is in boom. It has been observed quite often that, when the markets are in an upswing, most investors start to re assess their targets and due to an unfortunate slump in the market, they might lose out on most or all of their investments. It can get messy if you might require debt like home loan etc to finance your future requirements as the repayment can take years to complete.
Another reason that can be cited as one of the reasons as to why you need to opt for a trigger is because it encourages goal oriented savings. If you intend to go for a foreign holiday or buy a car you can choose triggers of a short term nature.
Types of triggers:
Most AMCs provide various types of triggers. You as an investor need to sort as to what your goals are and decide the type of trigger accordingly. The nature of the triggers is to move your funds from equity to debt funds as and when specified by you.
Capital Appreciation/depreciation:
When your investment grows or shrinks by a certain percentage as decided by you.
Switching appreciated capital:
Your gains on your investment are transferred to a debt fund while keeping the original investment intact.
Sensex/Nifty level:
When the market moves up/down up to a certain level, once you have achieved your desired level you can choose to exit the fund with this trigger.
Entry trigger:
When the market plunges to new levels, the money can be moved towards investing in equities.
Pre-fixed amount:
When the investments grow to a certain level, this trigger will look towards selling some units.
Net Asset Value:
When the NAV increases to a certain amount, you are in a position to redeem the funds.
Date:
Depending on your choice for investing or exiting a fund on a particular date, you can choose this trigger.
Choose your level:
Depending on your risk appetite, you can decide the level of risk you are willing to take. If the markets are on a bull run, you can expect returns from 12-15%. Triggers can be very helpful for only short term goals, and not for long term goals like retirement plans or your children’s higher education needs.
Apart from these benefits, you need to closely understand as to how your fund works. Exit loads are definitely going to be levied. But it is not necessary that all fund houses may do so. Closely analyze the the fees that can be levied when your investments move from equity to debt or vice versa.