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The Geopolitical tensions between Ukraine and Russia are ON and the war is ON. The effects of the war can be seen everywhere in the world. People of different nations stuck in Ukraine are continuously demanding evacuations.
The government of different countries is enforcing different sanctions against Russia so that they can call off the war, but all efforts seem to be wasted. Well, as much the war is affecting the normal life of people, the same or maybe more it is affecting the market, both domestic and international markets.
If we recall, on the very first day of the war, a huge fall was seen in both Nifty and Sensex. The Nifty was down by approx. 800 points while Sensex was down by almost 2000 points.
Simply, the war has intensified the volatility in the market and investors are again in panic mode. Investors are panicking and taking money off the table before tensions escalate further and the market affects more!
However, the prominent question is again trending among mutual fund investors in India- Should I wait and invest more or Should I redeem now?
What Mutual Fund Investors Must Do- Redeem or Invest More?
Well, it is natural to ask this question, given the stupendous gains made in the last couple of years anyone would like to protect the gains by booking profits.
Besides, it does not just tension between Ukraine and Russia worrying the market. Still, other factors such as skyrocketing inflation, overheating of crude oil prices, supply-chain disruptions, the possibility of interest rate hikes, liquidity squeezing, and their serious ramifications on the economy, are all making the markets jittery.
So basically, whether you should redeem your investment now or later must be decided based on all the necessary parameters. Having said that, should you sell your mutual fund investments in panic?
What investor needs to understand is that these are temporary declines, once the situation gets right the market will be again the track.
We cannot ignore the part of an effort that other countries are putting in to end the conflict between Ukraine and Russia. Here what experts can suggest is, if you do not need the money in urgency, leave it where it is, and let it grow.
If you fear out to loose more then one thing you can do is do not invest more in that fund for right now, once the situation gets on track, get back to your investments.
Situations When You Can Consider Redeeming!!
Experts also say that there is some situation where you can consider redeeming your mutual fund units, in case of market volatilities. Let us see what are these situations!!
If you are not holding some of the best mutual funds schemes or your fund is under-performing for a long time- Review your portfolio on intervals, help you evaluate the performance of your funds as per your goal, and thus help you decide whether you should go with that specific fund or you must switch to another best fund. This way you get the portfolio back on track and make it robust by replacing certain schemes that have been non-performers.
If the portfolio appears skewed and needs rebalancing- If your allocation is overly skewed to equities greater than 70% that you wish to maintain, you need to rebalance the portfolio. In such a case, you may redeem from equity mutual fund schemes and reinvest in debt mutual funds and/or fixed-income securities.
If you have attained your financial goals- If that is the case, it is a good reason to sell/redeem your mutual fund schemes, particularly the equity-oriented ones. If you do not need it immediately for the financial goal, this money could be parked in pure Liquid Fund/s or a bank Fixed Deposit/s.
Lastly, being an investor, investing to create wealth, you must remember that even if market volatility intensifies, do not discontinue your SIP Systematic Investment Plans (SIPs), in worthy mutual schemes, particularly when addressing certain financial goals.
You might miss a chance of accumulating more units if you discontinue or stop (SIPs) when markets are in a downtrend. This will end up applying brakes to the process of compounding, considered to be the eighth wonder of the world.
You can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible. Keep reading our article and stay updated with the latest news about Mutual Funds!
(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).