Stay committed to your investment plan

Investors seeking to create wealth over the longer term must have higher exposure to equities, as compared to other asset classes. However, in reality, only a small section of investors relies on this asset class, as volatility in the stock market continues to influence their investment decisions. As a result, equity has not been able to find its rightful place in the asset allocation process of Indian investors.

Volatile markets often make investors grapple with dilemmas such as: Should I exit my equity fund portfolio and move into debt funds? Is this a great buying opportunity? Should I redeem my holdings now and reinvest just before the market starts moving up? How long will the volatility last? These dilemmas often make it difficult for investors to make a rational decision. If you are one of those investors who have either not invested in equities so far for the fear of volatility or finds it difficult to deal with, the key is to realise that even the most volatile markets can't undermine the long-term potential of equities.

While every investor hopes to be suitability rewarded for the risk taken, by investing in a volatile asset class like equity, the extent to which one can realise the true potential of this asset class depends upon how the volatility is tackled during the defined time horizon. For example, while the portfolio valuation gets affected in the current market like situation, it is vital that you don't allow it to influence your long-term investment strategy. Of course, it is important to ensure that your portfolio is tracked on an on-going basis and remains adequately diversified at all times.

Always remember that too much of experimentation during periods of uncertainty can spell disaster for your financial future. A simple strategy to avoid making ad hoc decisions is to have an investment plan in place and stay focused on your investment goals. It automatically irons out indiscretions from your investment process.

If you are a long-term investor, the market level should just be seen as a milestone in on-going march of the economy. Similarly, if you are new to investing, any time would be a good time to begin your investment process provided the intent is to not only invest for the long-term but also follow a disciplined investment approach.Remember, with any investments there are two key decisions to be made. The first is when to buy and the second is when to sell. Obviously, the difficult one is to know when to sell. A goal-based investment approach, with a clearly defined time horizon, takes care of both. Besides, it becomes easier to decide asset allocation by focusing on capital safety for short term and on growth for long-term goals.

It is heartening to see large number of investors embracing the disciplined investment approach. While it is true that even those who began investing in equity and equity-oriented hybrid funds through SIP a couple of years ago are seeing decline in their portfolio valuation, the impact is much less as they continue to invest at lower levels and that would help them bring their average cost down over time. Simply put, more money they invest at the lower levels, the lesser recovery they have to make to turnaround their portfolio performance.

As is evident, dealing with market volatility is far easier when you have an investment strategy in place. Remember, by reacting rationally and in a composed manner during your investment period, you can hope to build a sound financial future.

The writer is CEO, Wiseinvest Advisors