How can investors preserve their wealth during times of crisis
It is said that half knowledge is more dangerous than ignorance. This truism holds true today when you see the amount of misinformation floating around as genuine advice in the wake of the COVID-19 pandemic and the stock market crash. While the advice is well-meaning, there is always a chance that it is only half-true or worse, completely wrong.
Going by the current trend in the market, it is encouraging to know that there is a section of investors who are unperturbed by market volatility and to the contrary see these market movements as an opportunity. Mutual Funds saw net inflows into equity and equity-related schemes of over INR 11,700 crore, as multicap, large cap and mid cap funds witnessed higher inflows, and monthly SIP flows at a high of INR 8,641crore as on March 31, 2020.
This is because the retail investor has evolved over time. They have become more aware of reasons for market volatility and what they must and must not do during those phases. However, there is a sizeable section of the investors who still panic and get affected by all the noise around them.
Stay with or add more investments
It is a given that markets will move up over the long-term and SIP is one of the most efficient ways of breezing through such volatile times. Light on the pocket, an SIP will help you continue with your investments and pick up higher units at a lower NAV. The benefit of higher number of units will be experienced when markets start to move up again.
Investors who have SIPs to their names should not panic and stop their SIPs.
For investors whose SIPs are about to expire in the coming months, it's an opportune time for them to consider taking advantage of the market lows by continuing their investments; adding new ones or choose a top up in their existing scheme.
For investors who have some liquidity at hand, lumpsum investments could be considered at these levels. New investors should not try to time the market to look for a more favourable time to start investing. The right time to start investing is now and investors could choose mutual funds as the preferred vehicle to benefit from portfolio diversification in a staggered manner. Additionally, stock prices currently are extremely volatile and finding a suitable investment may be time-consuming and confusing. So, leave it to the experts at mutual fund houses to make appropriate investment decisions for you.
The volatility we are seeing today will seem like a small hiccup over the long-term. Instead of running away, investors should ride alongside it and over the next decade, experience the benefits of their patience and resilience. Thus, we urge investors to avoid taking a U -Turn on their goals and treat this time as their turn to stay invested.