Indian market is in tough situation due to corona virus and YES bank issue. Economists say that is it correction in Indian market as it is highly overvalued. Let us discuss how market crash impacts to long term investments and what should we do in case investing in mutual funds in SIP mode.
Recession and market corrections in Indian market is not new to India. We already handled the situation in 2000- 2001 and 2008-2009. But what would happen to our investment in mutual funds in this tough times. Since equity oriented mutual funds has more exposure on equity market, it would have impact and it would show negative returns for mutual funds.
It’s scary at the time when stocks tend to fluctuate. When the stock market goes down, it’s like a big sale on stocks. It’s the best time to buy more. But it’s the worst time to sell. But all it for direct equity market exposed investors. They would buy or sell based on market condition. For mutual funds, mutual fund managers takes care of investment portfolio and diversification for the fund. For mutual funds investors who is investing for long term goals(10 years and more), it would not impact heavily. After market recover from this tough situation, it would be averaged in long term.
In long term, mutual funds would give better returns as it managed the situation in 2001 and 2008.
So long term goal oriented mutual funds investors, do nothing. Just ignore all the market news and focus on improving your skills. In case you are direct investor in stock market and waiting for market timing to invest lump-sum in the market, it would make sense to follow the market.
Long term goal oriented mutual funds with 10 years and more, do nothing and ignore all the market news.
Do not try to redeem/sell off your mutual fund investment. It is worst time to sell your equity mutual funds investment. Wait for recovery in case you investment your short term investment in equity mutual funds. Do not do the mistake again by parking your short term investment in equity mutual funds. Investment for less than 3 years should be invested in debt oriented mutual funds which invests in bond market. It would give better return than fixed deposit with less risk.
Short term investment should go in debt mutual funds, not in equity mutual funds.
Do not worry on correction in the market. In it not only for stock and mutual funds markets. This cycle applies for all the investment such as real estate, own business and Gold. Now it is impacting real estate market as well. In case you own a home and real estate market goes down, you will not sell the house immediately. You would wait for real estate market to recover and sell it only you require cash. Follow the same strategy for mutual funds investment. Invest for longer term with discipline for your financial goals.
SIPs give you the benefit of compounding and RUPEE COST AVERAGING.
Over the long term, SIPs give you the benefit of compounding. Investing mutual funds in SIP gives you the benefit of rupee cost averaging as you buy more units due to the fall in markets. In case you want to use the advantage of the sharp fall in equity prices, increase your mutual funds by 10% in the bear market. On final note, continuing with your mutual funds SIP’s and let our fund manager do their job. Stay Invested..
Stock Market + Experience + Low Risk + Simple = Equity mutual funds
Investment for Retirement or Kids higher studies? Long term investments
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