Investors should take a stock of their portfolios and analyze their current holdings in Mutual Funds, Direct Stocks, Bonds etc. Will be a great idea to measure the Sectoral exposures through the various products you have invested in.
- By Suren Kochhar
We have been witnessing some very sharp movements in Equity and Fixed Income markets, Globally and in India. The Nifty 50 Index has fallen over 25%, Nifty Mid Cap 100 Index has fallen over 26% between January 1, 2020 to April 9, 2020. The Indian 10 Year Benchmark Government Security, 6.45% 2029 has observed intraday yield movements between 6.692% (on January 14, 2020) to 5.995% (on March 9, 2020) in the period January 1, 2020 to April 9, 2020. We are surrounded by negative information around us related to economic growth and recession as well. Although, specific to mention here, in the past few days we have viewed some very swift positive moves by the Government and RBI on the Monetary and Fiscal Measures, these steps taken will definitely ensure our economy to gain momentum at the earliest.
With our Stock market’s in such a volatile scenario, Mutual Funds have also witnessed a huge fall in their Equity Scheme NAVs across and that has induced a worry situation in the minds of Investors. Well, my clear advice here would be not to “PANIC”. Always remember, “Equities are Volatile and Volatility is a measure to make higher returns”. So simply put, I would urge Investors to take a stock of their portfolios and analyze their current holdings in Mutual Funds, Direct Stocks, Bonds etc. Will be a great idea to measure the Sectoral exposures through the various products you have invested in, also get in touch with your Financial Advisor to help you analyze the data. But under no circumstances press the Panic Button viewing your investment portfolio being reduced at the moment! Hence, I would recommend “Things to Do & Not to Do” in these market scenarios. Some of these would be:
- To begin with, do not stop any of your Systematic Investment Plans existing with Mutual Funds, in fact now is the time to increase your SIP investment value. Would recommend increasing the SIP investments only in the current SIP Schemes where you are already investing, this will enable better averaging opportunities. Must consult your Financial Advisor to increase the SIPs investment. Further, do not redeem your investments at all, as these are notional losses. You will create these losses into a reality if you were to redeem them now! Must stay invested as you have invested for the long term. Hence, let’s not change the definition of “Long Term” due to these Short Term volatilities being observed currently.
- Cash is King when it comes to Direct Equity investments now! I am sure you must be wanting to explore investing in direct stocks as some of the Bluechip companies are available at a great price. I would not endorse this thought now as the overall outlook of the Equity market continues to be weak and the bottom is yet not known! The Risk you will carry will be higher in such a case. Though, in case you are already invested in some Bluechip Stocks, then you could invest further in the same Bluechip Companies, but stagger your investments over at least a month or two to arrive at a better price discovery. Though, I would caution here to seek advice from your Financial Advisor.
- Interestingly, Exchange Traded Funds are a great value for you to invest in currently. As ETF’s are focused at an underlying index, have a low cost of management, are well corrected in these markets, provide complete transparency and are at real time pricing. There are multiple options available through Mutual Fund Houses to pick your choice of ETFs to invest in. ETFs also provides an opportunity to either invest in a diversified index through the underlying index or invest in a sector specific index.
- Also, it’s a good time to have some allocation to Fixed Income as well. It will be advisable to start SIPs in Medium to Long Term Debt Funds. This will provide as a great asset allocation tool and help you build a sizable corpus over a long period of time in Fixed Income portfolio.
- Lastly, do maintain around 10% liquid holdings during current market environment. Surplus cash holdings can be invested in either Overnight or Liquid Funds, these funds provide liquidity and reasonable returns. Alternatively, you may choose to simply park these funds in your Bank Accounts as well.
Though, it will be a combination of multiple options available to us, however, stay invested & do not panic. Continue believing in the Long Term positive outlook of our Indian Economy for creation of your long term wealth.
(The author is Suren Kochhar, Senior President, Head of Sales & Marketing, YES Asset Management (India) Limited. )