Volatile Markets : 4 Things To Note For Mutual Fund Investors

Mutual Fund Investors Should Not Do These 4 Things in Current Volatile Markets Scenario

Introduction

Indian stock market is currently going through a correction phase. In this article, we will discuss the 4 things to note for mutual fund investors in current volatile markets in order to generate higher returns.

Volatile Markets : 4 Things To Note For Mutual Fund Investors

Lets discuss the which are those 4 things to note for mutual fund investors in current volatile markets.

1.Do Not Focus Too Much on Current Market Scenario

• Indian stock market has entered a correction since last couple of weeks due to lack of measures in the budget 2019 to stimulate the economy. Also, taxation on the super rich has adversely affected the foreign investments and soured the market mood.
• The Indian equity markets is going through a slow down due to both internal and external factors. Following are some of the factors/reasons behind the slowdown.
  1. Internal factors : NBFC crisis, Slowdown in auto sales, consumption and manufacturing
  2. External factors : US China trade, Brexit, uncertainty in crude oil prices, overall slowdown in global economic activity
• Thus, you should not take your investment decisions in this kind of current scenario in the stock market. You should always remind yourself one important thing that you are investing in the stocks to achieve your long-term financial goals.
• So, you should not focus on or worry too much for the short-term volatility and sentiment in the current market scenario.

2.Do Not Stop Your SIPs

• SIP route helps you average your purchase price and helps you with better returns with relatively lower risks. This rule applies for all Equity SIPs.
• When market sentiments start becoming a bit panic or unshielded, most of the investors start worrying about their regular investments SIPs and raising a question on continuing their SIP investments. But, stopping your SIPs would not be a smart move.
• The investors who would continue with the SIP investments during the market slump would gain by buying more units of the same fund. It helps them to buy stocks at a discount. Hence those investors who stick to their SIP investments would gain significantly through a lower average price of holdings.
• So, you should not stop your SIPs in current market scenario in order to get the advantage of stock purchases at the discount.

3.Do Not Change Your Original Investment Allocation

• Most of the investors tend to change their investments in times of market volatility. 
• The BSE Sensex is trading lower compared to the 1-year-ago and 3-months-ago levels, while it is flat compared to its level 6 months ago.
  • In the past one year, small cap and mid cap funds have offered negative returns of almost -16% and -12%, respectively.
  • Thus, many investors tend switch to large cap funds to be safer if mid cap and small cap funds are not showing the expected performance. But that is not a right move.
• Keep on altering the original investment allocation would affect your investments and can hamper your long-term returns.
• Don’t think about changing allocations, moving to safer schemes etc. The best thing to do is to do nothing, in such uncertain, volatile market conditions. So, Stick to your asset allocation.

4. Don’t Be Too Excited

• Many smart investors make strategic allocations in a falling market to maximize wealth. Such tactical allocations will definitely helps you to buy more in a sluggish market.
• An aggressive investor is prepared to take higher risk in anticipation of higher returns. Many times, you tend to go overloaded in the sentiment of becoming too excited in falling markets.
• However, you should allocate your surplus funds to make strategic investments only after thinking it through. Allocate only the part you do not need in a short term.
• Don’t be too excited for profit booking by going overloaded in sluggish markets. The market may not move as per your expectation and you might incur losses in the process.