Hyderabad: The stock market has been volatile for a few months now and came very close to the lifetime highs. While experts attribute this to inflation, rising interest rates, the fall of the rupee, the slowdown in GDP growth and international developments. These conditions are troubling new investors, but with a long-term strategy, this is a positive development for those who continue to make hierarchical investments in mutual funds.
As we all know the stock market is volatile and fluctuations are inherent in this. Meanwhile, new investors have already seen a decline of more than 10 per cent in the value of their investment. In the short term, it may be even more so. However, this instability helps those with financial discipline.
In reality, stock market corrections happen relatively frequently, and this is normal when it is up to two to five per cent. Hence, investment strategies should be drawn up when it exceeds 10 per cent. We have seen many instances where the market has moved strongly after the fall. No matter what the history, we know the situation after the Covid-19, and those who withdrew investments from the market could not earn profits while those who took the advantage of the opportunity made available at a lower value had received higher returns.
Also read: Are mutual funds better than stock investment?
Investing in stocks is like being willing to pay a risk. But, in the long run, it will not be so. There is a possibility of higher returns than that. Investment in equities should not be withdrawn for three to five years and how much to allocate to equities is key. A 40-year-old can invest up to 70 per cent of his investment in equity funds while a 40 to 55-year-old should have 30-60 per cent and a 55-year-old should have less than 30 per cent equity investments.
We should try to take the average benefit during the rupee fluctuations and a Systematic Investment Plan (SIP) in mutual funds is one way to do this. Units purchased at low prices can help increase wealth in the long run. Funds put in the market should continue with a goal. Selling fund units for small needs is not a good decision. When your goal is less than a year, you should only partially meet that vital funding requirement. Additional investments can be considered in the current market conditions.
Instead of investing large sums at once, first, invest in liquid funds and then hierarchically transfer to equity funds. At the same time, it is important to ensure that investments vary according to their ability to bear losses. Only the investments you make during the ups and downs will allow you to create wealth in the long run. It should be considered as an opportunity for strategic investment whenever the market is declining, says Adhil Shetty, CEO, Bank Bazaar.
