Markets
BSE See NSE See 39,351.15
238.41 (0.61%)
collapse Related Readings collapse

Rediscover Your Faith In Equities

| 5/31/2012 9:00 PM Thursday

Over the last couple of years, the markets have been on a roller coaster ride. Investors have been reacting differentlyto this volatility in the market. While on one hand, there are investors who have continued their disciplined investment approach, on the other hand, there are also those who have put a halt to their investment in equity funds. This mixed reaction is quite similar to what has been witnessed over the years during extreme bouts of volatility.

However, it is heartening to see that investing through Systematic Investment Plans (SIPs) has allowed an increasing number of investors not only to stay invested, but also to continue their investment process. It is now time for others to avoid taking hasty decisions in panic so as to get the best out of their equity fund investments.

Key Points:

  • Market volatility is a natural phenomenon, and hence all equity fund investors must be prepared to tackle these ups and downs.
  • Investing through Systematic Investment Plans (SIPs) has allowed an increasing number of investors not only to stay invested, but also to continue their investment process.
  • A disciplined approach of investing at pre-defined intervals can go a long way in helping investors to avoid investing a large sum at a particular market level.

No doubt, investing fresh money as well as holding on to existing investments during extreme market volatility can be quite nerve-wracking. However, the fact remains that market volatility is a natural phenomenon, and all equity fund investors must be prepared to tackle these ups and downs. Investing in equity funds with a defined time horizon and investment objectives can help investors manage volatility, as the focus remains on long-term goals.

We have all heard that equities have the potential to outperform other asset classes over the long-term. However, to ensure that one gets the best out of equity investment, it is important to make the right selections as well as to follow the right investment strategy. Equities not only require a time commitment, but also the dedication to continue the investment process through the market ups and downs over a defined time horizon. Another important aspect is to have the required flexibility to realign one’s portfolio in keeping with the changes in one’s circumstances, the markets and economic conditions.

A disciplined approach of investing at pre-defined intervals can go a long way in helping investors to avoid investing large sums at a particular market level. This is important as many of us have the tendency to chase performance in a rising market, and hence, often a major chunk of our investments is made in equity and that too in funds that hog the limelight. This often results in over-exposure not only to an asset class, but also to certain sectors and segments of the market like Mid-Cap and Small-Cap.

Investors should remember that diversified funds should be the mainstay of their portfolio, and exposure to aggressive funds, i.e. Sector, Specialty, Mid-Cap and Small-Cap funds, should be limited to 30-35 per cent of the portfolio value. Of course, the exact level of exposure can differ depending on one’s risk profile and time horizon.

History shows that quality diversified funds yield above average returns. The years of spectacular growth help even out the portfolio returns during bear markets. Therefore, it is vital that investors should not allow their expectations to be distorted by extraordinary returns during bull runs or by dismal returns in falling markets.

Coming back to the need to realign portfolios, many investors simply refuse to make changes despite the unfavourable mix of funds in the portfolio. That is because they don’t like the idea of booking losses. More often than not, they take it as a personal defeat and refuse to exit from a fund unless the NAV reaches the level at which they entered the fund.

Investors need to realise that banking on a fund that has been underperforming on account of faulty stock selection and/or investment strategy is not a great idea. While it doesn’t make sense to make changes in the portfolio every now and then as every fund goes through a phase of indifferent performance, retaining a proven non-performer can be also detrimental to one’s financial future.

Remember that by making the right moves now, you can benefit immensely. In addition, to achieve success on a continuous basis, make rebalancing of your portfolio a rule rather than an exception.

Hemant Rustagi
CEO, Wiseinvest Advisors Pvt Ltd.

 

Find More Articles on: DSIJ Magazine, In Focus, Personal Finance, Mutual Funds, Product, Large Cap

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.