'Returns win headlines, but this wins the long game': Wealth advisor on investment strategy

Financial experts are emphasising the significance of consistency over sheer performance in building long-term wealth through investments. CA Abhishek Walia, Founder of Zactor Tech, recently highlighted the importance of understanding Standard Deviation as a crucial factor in investment decision-making. According to Walia, many young investors focus on high returns without considering the risks associated with volatility, a mistake that can jeopardise their financial future. "In investing, returns get all the attention. But it’s consistency that helps you stay invested and build real wealth," he said.

Standard Deviation, a measure of how much an investment's returns fluctuate around its average, is a key concept that many investors overlook. By quantifying an investment's volatility or risk, Standard Deviation provides a clearer picture of the potential ups and downs a fund may experience. "Standard Deviation measures how much a fund’s returns fluctuate around its average. In simple terms, it’s a volatility gauge," Walia explained. A low Standard Deviation indicates stable and consistent returns, while a high Standard Deviation signifies greater volatility. This understanding is vital for making informed investment choices.

Walia emphasised that understanding Standard Deviation can significantly affect investor behaviour and decision-making. "This matters because it directly affects your behaviour," he said. "If a 20–25% dip will make you anxious and push you to exit at the wrong time, you shouldn’t be in high-volatility funds to begin with." This insight underscores the importance of aligning investment choices with one's risk tolerance and long-term goals.

Moreover, Walia pointed out that different investment goals require different levels of volatility. For instance, "Your retirement corpus doesn’t belong in a hyper-volatile small-cap fund," he noted. This remark highlights the necessity for investors to evaluate their portfolios in terms of risk-adjusted behaviour rather than focusing solely on returns. "Risk-adjusted behaviour beats blind return-chasing every time," he affirmed.

As part of Zactor Tech's initiative, Walia aims to develop AI-driven financial tools to help young investors better understand their portfolios. "We want to help people understand their portfolio not just in terms of what it earns, but how it behaves." This approach is intended to foster smarter investment strategies that prioritise patience and resilience over the pursuit of flashy returns. "It’s not about investing harder—it’s about investing smarter," he said. "Returns win headlines, but risk-adjusted patience wins the long game."

With rapid market fluctuations becoming more common, Walia's closing advice is straightforward: "Stop chasing flashy numbers. Start understanding volatility." This counsel is particularly relevant for new investors eager to secure long-term financial success but who may be tempted by short-term gains.

By focusing on consistent and informed investment strategies, they are more likely to achieve sustainable wealth creation. Additionally, understanding the nuances of volatility helps in making informed decisions that align with one's financial objectives, ensuring a more secure financial future. This comprehensive approach to investing can significantly enhance financial stability and growth over time.