Do Not Try To Time The Market
The spread of the novel corona virus has had a catastrophic impact on equity shareholders. Within a period of less than two months more than Rs 50 lakh crore of their wealth has been wiped out. Historically speaking, such events have created a sense of fear among investors. Nevertheless, this time they are looking it as an opportunity to enter the market. Anecdotal evidence suggests that several online wealth management or robo-advisory platforms providing mutual fund services have witnessed a massive spike in new account openings and registrations.
This also includes an increase in mutual fund systematic investment plans since the fall in the market. Even various fund houses have reopened some of the schemes for lump sum investment, which was restricted till now for various reasons. There is no harm in investing now. Past records, however, suggest that you should avoid timing the market as even the best of the professionals fail to do this on a consistent basis. Someone who has been a witness to the shocking financial crisis (GFC) of 2008-09 will appreciate this.
Those who had tried to time the market and invested after the market fell drastically in the month of January 2008 got their hands burnt as the market fell another 50 per cent over the next 14 months. I am in no way suggesting that this market is also going to fall to the kind of levels that we saw during the GFC. My suggestion is that when you invest in mutual funds you should clearly understand the risk associated with it.
And moreover, you should have a proper asset allocation plan in place that suits your risk profile. Understanding our readers’ urge to invest now, we are presenting in this issue a portfolio of mutual funds that you can invest in now. It is suggested that you to invest in them in a staggered manner if your strategy is to invest in a lump sum. The portfolio is given for three different categories of investors based on risk profiles. You can pick and choose one that suits your risk profile and start investing.
SHASHIKANT