<div><em><strong>Sunil Dhawan </strong>writes that more than listening to predictions and tracking the daily movements, MF investors should remain focussed on their long term goals and keep their SIP running</em></div><div> </div><div>It’s a roller coaster ride at the stock markets not just in India but globally. The markets are up for a day and the next day it comes falling and recoups the next day. Volatility in the markets as captured by VIX is up by nearly 70 per cent in last 1-month and is about 63 percent up YTD.</div><div> </div><div>Globally, when economies, both of developed and emerging nations are looking feeble, markets are bound to get perturbed. At a time when Europe, US are still not out of the woods and were banking largely on the Asian economies especially China, the slowdown of China growth story has hurt the markets badly. If China falters more on the growth path, the pain could prolong. If Chinese data comes up well for the next few quarters, it’s when the markets could be up for a big reversal. What’s happening in china or how its government is bailing out the economy, is far from common know-how. </div><div> </div><div>Overall, it’s getting scary for all especially retail individual investors. Already, there are reports suggesting bear market ahead, while many are hinging and placing their bets on the India’s emerging economy. As a mutual funds investor here are few things that one can do.</div><div> </div><div>Do not listen to predictions: It’s absolutely impossible for anyone to predict the movement of markets. Period. Stay from predictors at all cost. Factors affecting market movements have increasingly become more complex, inter-related and dependant on global events as well. Further, there are technical factors too at play. When technical support levels are broken by market, the next level gets projected as the support. But then, markets move on their own and all these support can be broken. There’s no harm in catching the market when it’s already up 800-1000 points. Investing based on predictions could be financially damaging. </div><div> </div><div>There could be vested interest in predicting markets on either side, a fall of 1000 points or a rise. It could be a trap for retail investors, who several studies have shown in the past are mainly left high and dry when markets reverse direction. Be invested in markets, one never knows when the markets reverse and bounces back. </div><div> </div><div><strong>Keep SIP running:</strong> All those MF investors, investing through SIP may continue with them. SIP’s are not making all your fund get exposed to market volatility all at once. When index is down, they get more units while when the index rise, the units bought is less. This approach helps in accumulating units, the average cost of which is lesser than otherwise. The risk of volatility gets minimised through SIP approach. </div><div> </div><div><strong>Looking to invest lump sum: </strong>With regards to fresh money, the approach gets tricky. If you are looking to invest a lump sum in current markets, tread cautiously. Depending on your goals and risk appetite, invest the amount partly in debt and partly in equity especially through STP. Instead of putting entire money in equity funds, in STP, funds are initially put in liquid or a debt fund and a mandate is given to keep transferring a fixed amount on regular basis (say, monthly) into the equity fund of same fund house. Here’s more of STP.</div><div> </div><div><strong>Park in debt: </strong>Interest rates in the economy are on its way down. When rates fall, prices of debt instruments move up. Investing in debt funds could help in these times and one may expect a decent return over the next 3 years period. Invest in debt fund with a 3-year horizon as they qualify for long term capital gain tax of 20 percent after indexation, after 36 months of holding the units. </div><div> </div><div><strong>Review your MF portfolio</strong> – This could be the time to review your portfolio. Look at returns of funds of your portfolio against benchmark and market returns. This could be the time to remove the under-performers. There could be funds which have fallen far in excess of markets. Funds which have fallen less could form a part of your portfolio too. </div><div> </div><div><strong>Asset allocation:</strong> With equities and gold values down and debt prices on the up, your portfolio also could require asset allocation restructuring. Fresh funds could be required to be invested in equities. Use the STP approach. The reason to invest further especially when markets are down is also because of this. </div><div> </div><div><strong>Diversification </strong>– This could be a time to make use of the opportunities. As and when reversal happens and economies start to show prosing growth, it’s the banking sector funds that outshine. Invest in banking funds and here’s how to go about it in a more cost effective way. </div><div> </div><div><strong>For new investors:</strong> if you are one among those who have taken the saying “invest when other are fearful, sell when others are greedy”, too literally, try investing through index funds. Even beginners who want to enter markets in these times and ready to brace the fear and volatility, should take the index fund route. A better approach could be to stagger and keep buying more in every fall. Who knows a reversal could be seen soon.</div><div> </div><div> </div><div><strong><span style="color:#ff0000;">Read Also:</span><span style="color:#0000cd;"> <a href="http://businessworld.in/companies-markets-markets-stock-market/here%E2%80%99s-how-you-can-ride-over-stock-market-storm#sthash.yD29x8lj.hFQTJd04.dpbs">How You Can Ride Over A Stock Market Storm</a></span></strong></div><div><strong><span style="color:#ff0000;">Read Also:</span> <a href="http://businessworld.in/banking-finance-personal-finance/why-you-should-invest-more-when-markets-are-down#sthash.E8G88FB9.dpbs"><span style="color:#0000cd;">Why You Should Invest More When The Markets Are Down</span></a></strong></div><div><strong><span style="color:#ff0000;">Read Also:</span><a href="http://businessworld.in/banking-finance-personal-finance/time-right-banking-sector-funds#sthash.p0NSeClR.dpbs"> Is The Time Right For Banking Sector Funds?</a></strong></div><div> </div><div> </div><div> </div><div> </div><div> </div>
