Financial markets have experienced sharp corrections owing to the global pandemic caused due to the coronavirus. This in addition to the nationwide lockdown and staggered economic growth has resulted in forming dents in investors’ convictions and thus giving in to panic sentiments. That being said, it is recommended that investors understand the concept of market volatility from the historical point of view, when similar market corrections happened in the year 2008 and 2011.
A smart investor can consider the following during the current market conditions:
- Consider the creation of an emergency fund, with an eye towards any untoward expenses owing to unforeseen circumstances such as job cuts or salary delays, medical expenses, which may disturb one’s financial standing.
- Reassessing your portfolio’s asset allocation and ensure that it is in line with their individual investment strategy and take prudent decisions according to your financial requirements, current risk appetite and time horizon for investment.
- Refrain from giving in to panic selling or waiting for the right time to invest in the markets. The current scenario can be seen as an opportunity for those who wish to embrace market volatility while allocating their assets according to their investment objectives.
- To continue investments through a Systematic Investment Plan (SIP) as they provide rupee cost averaging to even out your costs over the investment period.
To build your emergency corpus over time, investors with a relatively low risk appetite can consider investing in liquid funds where you can park your surplus money and can opt for instant withdrawal facility provided by some mutual fund houses. This facility allows the investor to withdraw a certain sum of money which comes to your bank account within a few hours of redemption. Also, no exit load applicable if the money is withdrawn after seven days of investment in the fund. Investors are advised to read the SID or Scheme Information Document for more information on the redemption of units in the particular liquid mutual fund scheme.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.