Large-cap focus has delivered returns and so have mid- and small-cap focus. A number of sector funds, such as UTI Petro Fund, SBI Pharma Fund and Alliance Basic Industries, are in substantially positive territory in terms of returns. Index investing has delivered returns too.

Choice is important: The year also underlined the importance of security selection for investors. Although almost all asset classes and investment options paid off, the extent of returns generated by an investor was to a large extent dependent on the particular investment option that was chosen. Research on investments in developed countries suggests that choice of security is not as important. However, in India, the choice of a particular security has always been important and 2003 has not been any different. For instance, in equities, index investing again proved to be a loser in a relative sense; a choice of actively managed funds would have been more rewarding. Funds such as Prima, HDFC Equity, Reliance Vision and Sun F & C Resurgent India, to name a few, stood out with their returns outpacing the markets and peer funds by a large margin.

Challenges for 2004: With equity prices rising substantially, it would appear that investors could hardly have taken a wrong step in 2003. But this has sown the seeds for a maze of challenges in 2004. With asset prices scaling peaks, future returns from all these asset classes will necessarily have to be significantly lower than what was achieved in 2003. If the economy sputters, the ride could even become jerky as some of them could turn out to be losers. Given this backdrop, investors should concentrate on minimising risks.

This is because the key to building wealth is more dependent on losing less in a downturn than gaining substantially in an upturn. What you gained when stocks went up 100 per cent could be lost with a decline of just 50 per cent. In this backdrop, the accompanying box provides a list `do's and don'ts' that would prove useful, and could to be practiced in 2004.

Even if you practice disciplined investing, 2004 will be a challenging year for investing. Investors might even struggle to beat inflation if they are considerably invested in debt. So extra care in nurturing investments will be needed. However, if the wheels of the economy do grind at a faster pace then nasty surprises can be avoided.

Dos and don'ts for 2004

Here is a short list of what one should focus on the `do' side:

Some don'ts

The list of what one should not do is equally important:

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