Investment Strategy for Volatile Market

Written on Monday, September 25, 2017
By Shikhar Srivastava

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Even though the market has remained volatile, investing money in equity mutual fund will help you gain over a long time. If you are investing via SIP mode, it not only gives you the benefit of compounding but also gives you rupee cost averaging benefit. These benefits help you in sustaining your returns, even when the market goes volatile. 

 

Nonetheless, it is not as simple as it looks, one needs to review and analyze the situation before making any investment. Moreover, while investing money through lump sum mode, you need to time the market as well to gain good returns. 

 

There are times when Sensex and Nifty have slipped into the negative and have not reached their earlier benchmarks for long, then also your funds would have performed better. This happens because mutual funds are managed professionally by fund managers. 
 
Therefore, investors, even though, if are a little worried, they should never go for direct equities instead go for equity-related mutual fund schemes. When to invest and when not to invest, should be done with the help of a financial adviser. However, if you are investing your money in mutual funds through SIP mode, you don’t need to time the market.
 
What to Do Under Such Situation?
 
If your investments are going on in equity and debt instruments, then you need to follow asset allocation strategy taking the proper guidance and help of your financial adviser. Following asset allocation strategy helps in minimizing the risk on your overall portfolio. New investors can invest lump sum if the market is on the lower side, else, they can easily opt for systematic investment plan, if they do not want to time the market.
 
How to Invest?
 
Investments should be made according to the risk appetite of an investor, several moderate or conservative investors who do not want to take a risk in pure equity oriented fund can go for balanced funds or large-cap funds because these funds can give them an exposure of debt and equity in 50:50 ratio and their money can get invested in blue-chip companies respectively. So, under the balanced fund, the debt will provide safety under volatile condition while equity portion will boost their investment amount. And under large-cap fund investment made in large-cap companies will help them in creating a hedge against the highly volatile market. 
 
Where to Invest?
 
Mutual funds are categorized into several funds (large cap, mid cap, small cap, diversified, flexi-cap, asset allocation, etc.). These funds consist of several schemes which are designed depending on the needs and wants of investors profiling, that is, how much risk they can take, how much time they can give to their investment and so on. Making an investment is not an easy task, self-assessment is very necessary before you enter into financial markets. Selection of funds is another highly important aspect.
 
What Strategy to Follow? 
 
Asset allocation strategy is what one should follow but the real question is how to follow. One needs to take proper guidance with one’s own financial adviser. As market always remain volatile, especially when you are investing money in equities, you need to be more cautious about when and how to switch your funds from equity to debt schemes. Asset allocation strategy helps in doing so. It also minimizes your risk when you reach nearer to your financial goal. 
 
How to Review? 
 
Once you have invested your money, you need to review it every six months or even quarterly at times so that you can analyze the positive or negative growth of your investments. You do not have to keep a regular eye on your investments daily, as mutual funds are professionally managed by fund managers who ideally maintain and construct their portfolio at every interval of time. The only concern you need to have is to seek your financial adviser’s help and observe that whether the fund you opted is giving you sufficient returns and can easily fulfill your desired financial goal.
 
If you follow proper asset allocation strategy and review your financial goals regularly, you can anytime enter into mutual funds’ investments. The only thing you need to know is underlying principles behind your investments.

 

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