By investing in a fixed schedule while also keeping the instalment amount fixed, you can easily avoid the complexity of ascertaining the right time to invest in the market
"Domestic and global slowdown has severely impacted the investor's sentiment. It's time to focus on investment's basic rules and avoid unnecessary investment mistakes"
The current investment market may not seem very promising for investors due to economic slowdown. However, if they stick to the basics and avoid irrational decisions, then they can get huge benefit in the near future. With the option to invest money in the different asset class, the mutual fund has now become one of the most popular investment products in India. However, with several domestic and global economic concerns, the investors are in a dilemma about what should be the right approach while investing in mutual funds in the current market.
The risk and reward may not always remain at the same level when you invest in any asset class. However, while investing in mutual funds, if you focus on the long-term, then you get the benefit of higher return with the lesser impact of the volatility on your portfolio. Similarly, by keeping some important point in mind that we have mentioned here, you can get huge benefits by investing in the mutual fund.
SIP is the best option amid volatile market
Systematic Investment Plan (SIP) allows you to invest money in regular instalments; therefore, you get the benefit of Rupee Cost Averaging while investing for the long-term. When the market is making lows, you get a chance to buy more mutual fund units at cheaper NAVs. On the other hand, you buy less unit when the market is high; therefore, it helps you to reap the benefit of the short-term market fluctuation. By investing in a fixed schedule while also keeping the instalment amount fixed, you can easily avoid the complexity of ascertaining the right time to invest in the market.
Portfolio Rebalancing
Investment should be strictly based on your financial goal. Suppose, as per your goal if you had planned Debt and Equity investment in the ratio of 30% and 70% respectively. Due to fall in the equity market, your portfolio structure has skewed towards Debt portion, and current portfolio structure is debt 50% and equity 50%. In this situation, try to realign the portfolio structure with your financial plan by investing more into equity fund and regain the desired portfolio structure.
Stay Invested
Due to the fall in the stock market, many people start panicking. They make mistakes like selling the mutual funds at a loss, or they stop further investment into SIP. When there is a correction in the stock market, that is the best time to invest, and when there is a surge in the stock prices, that is the best time to sell the holdings. So, at this time, investors should hold on to their investment in the mutual fund. This is the best time to get the benefit of the stock market fluctuation by investing through the SIP, so don't stop it unless you are into deep financial crisis.
Review investment
As the investment value has fallen for most equity mutual fund schemes, this is a good time to review your portfolio and make changes if required. You may have got schemes which were not performing well or significantly lagging behind its underlying benchmark, use the current market situation to switch to a better fund. You may take help you an investment advisor for guidance.
Finally
Undoubtedly, the current situation is a testing period for most investors, in which only the tougher will survive. It's time to protect your financial goals, so be realistic about your return expectation and select the right asset class that can help you to get your goal. Strictly avoid stepping into investment adventurism, as it can destroy your wealth, it's time to focus on the investment basics!
The writer is Chairperson, JRK Group
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