The last time market came tumbling on its feet was in 2007-08 and this year saw the same or rather say much more drastic turbulence in the market. The drawdown this year was recorded 27%, highest than ever. Most of the equity investors or rather say almost all equity investors saw a significant loss in their gains and those who entered recently saw a significant chunk of loss in their invested amount.  

Last month, i.e. in April investors saw a respite with drawdown drop of 18%. But the early trends of May are not showing anything favorable, the trend is turning negative again.

But hey, this situation is not faced only by you. Almost every market of the world that has a stock exchange is facing the coronavirus effect in their market.

In general, the whole world is facing the fear and uncertainty of the market. The VIX (Volatility index) of India is at it’s an all-time high in a decade. This phase is critical to all the investors as wealth creation is almost out of the picture for now. This is the reason that investors are asking “what to do now?”

The money that is already invested 

If you are investing, know that the money that is invested tends to be the money you won’t need in the near future. This is an informal rule to the investment in any asset class that is volatile. Taking out money now will give you some serious losses.

Remember that fall in the market is a temporary thing if it was to be permanent than no one would have invested in the first place. 

The investors who are invested since long know that whatever units or shares they have are representative of the best of the economy. They haven’t reached where they are without seeing any market crash or economic slowdown. So the investors who are invested since long have become immune to such turbulences. So, they need to hold on for a little longer and then take any action.

New investors must talk to old players for motivation and they must know this present condition is part and parcel of investment.

So, stay invested and stick to a reasonable investment amount/ asset allocation plan in coordination with your goals/ objectives. Let’s say you are investing in a fund that has been consistent in its performance and is aligned with your life’s objective then doesn’t stop it. The fall in the market means you will be getting more units of your fund by investing the same amount of money. You will see the impact in the future one the market starts behaving fine.

In case you have surplus money to invest in 

Don’t get to intrigued by the fact that you will get more units if you invest now and you have timed the market at its bottom. In the future, many have fallen on the face due to this attitude of investment. Times are bad it is advised to remain stick to your objective and invest the surplus in the same manner.

How to properly allocate the assets in order to attain both the long-term and short-term goals

Use this time to revisit your asset allocation and assess whether you were investing for some objects to be fulfilled or you were investing merely for the sake of investment and getting good returns.

Why aligning your investment to your goals is important? Because when you align both you chose funds most apt to reach your goals. You select a fund based on your time horizon and the final value of the amount you would need to fulfill your goal.

In case of long term goal (ten or more years away) the biggest challenge you face with your investment is inflation so the fund you choose must be such which would beat inflation.

For short term goals, it is advised to go with the fixed income-based investment that is much stable and secure with returns. One must also always have an emergency fund at the rescue that can help you tide over any bad or no income situation. One must have emergency funds that can cover for at least 6 months.

It is advised to take the help of an investment advisor to properly allocate your assets.

What to do with current running SIP’s????

If you haven’t till now then now is the time to study your fund, if your fund's performance has been consistent in the past and has been aligned to your goals then the suggestion would be to continue your SIP. As the market fall means you would be getting more units for the same amount of money.

Where is the quick money? Direct equity/ mutual funds/ bitcoin/ foreign stocks 

If you are a rational investor and you don’t want to but your money into gambling than equity mutual funds is the best offer for you. Because you cannot predict which firm will do good or will be able to sustain this market crash. So, holding a portfolio that has been objectively selected by credentialed and time tested professionals is the more logical choice.

Rest quick money is for speculators and that is pretty much the same as gambling with similar odds of fortune or ruin.

Should you sell everything and move to banks and FDs

A fall of approx. 30% is no reason for you to sell out everything and move to other saving options. The Indian market has recovered from more than 50% plus drawdowns and over the long term, and being an investor since long we have the confidence that along with the Indian market global market will also recover from the pandemic effect.

Though Bank FDs and other safe and secure saving options are great saving products but for the short term. In the long term, the post-tax returns from these options are either at par or below inflation. This means these investment options do not have the tendency to beat inflation and create wealth that you need to fulfill your goals in the long-term.

Conclusion

Always remember crises come and go what remains intact is your life goals and objectives and you need money to achieve those goals and objectives. So, you need to remain invested and keep investing in order to achieve your goals.

Happy Investing!

Mutual fund investment is subject to market risk please read offer related document carefully before investing.