Investing Lessons from The Festival of Colours

The festival of colours is one which we all await. Young children wait to throw water balloons, teenagers and young adults get excited about the splash of colours, and the adults look forward to the rituals while bowing to the sanctity of the festival. Pretty much everyone looks forward to the sweets and general bonhomie that the festival brings. Over the years, you might have learnt several things about the festival of colours ranging from Holika dahan to the importance of each colour. The interesting thing is that Holi teaches you not just about life or the triumph of good over evil, but also about investing and making good financial decisions.

So, here are the top four investing lessons from Holi.

1. Diversification:Holi is fun primarily because of the milieu of colours that come to life during the festival. Wouldn’t it be boring if Holi was played with only one or two colours? Each colour has its own significance and brings to life something meaningful. Your investment portfolio is similar in nature. Just a single investment or exposure to only one asset class is unlikely to serve its purpose. The aim should be to create a well-diversified portfolio that is spread across multiple investment instruments so that your portfolio can reap the benefits of each investment type.
2. Mix fun with safety:When you go out to play Holi, your mother would have definitely told you to be careful. To ensure that you don’t get hurt by the water balloons or the colours do not go into your eyes. By being careful, you don’t spoil the fun of the festival. Instead, by ensuring that nothing untoward happens, you make sure that everyone is happy. Similarly, when you create an investment portfolio, you must balance the risk and safety. While higher risk investments can potentially generate significant long-term returns, the relatively safe investments can act as a cushion to your investment portfolio at a time whenequitymarkets start falling.
3. Exercise control: Post the Holi celebrations, a quick look at the weighing scale would paint a clear picture of all the sweets you consumed over the festival of Holi. Now, anything in excess is not good. Which is why, as the festival gets closer, you might promise yourself that you will consume only a limited number of sweets. It is very easy to give in to temptation, but holding back has its own sweet rewards. In the equity markets, there are always instances that bring out your emotions and might influence you into making wrong investment decisions. However, you must exercise control and stick to your long-term investment strategy so you can reap the true benefits of investing.
4. Destroy the evils in your portfolio:The Holika Dahan symbolises the victory of good over evil and encourages you to shed the negativity from your life. Thus, Holi is a great time to review yourinvestment portfolio, identify the laggards or underperformers, and decide whether you want to exit such investments or continue holding on to them.

Most importantly, don’t forget to enjoy the festival or your investment journey. As long as you follow some important tenets, you will have a great experience.

 An investor education initiative by Edelweiss Mutual Fund

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