Change Your Strategy
All those investors who have been investing in equity over the past 10 years might be witnessing a first-ofits-kind scenario in their investment journey. Frontline equity indices have seen a cut of one-third in their value from the January peak. Such a sharp cut in such a short period have made many investors anxious, wondering what they should do now. First of all, as an investor you should understand that such a fall is part and parcel of equity investment. Such situations are beyond your control.
However, you can keep your emotions as well as your investment behaviour in check to safely manoeuvre your finances through this challenging phase. Most importantly, you should have your asset allocation worked out right and in a way that suits your risk-taking ability. It may happen that when the markets were doing well, you might have had a different perception about your risk-taking ability. Now is the right time to re-assess your risk appetite. The current fall is also a good opportunity to invest in lump sum, but in a staggered manner.
Do not try to time the market or wait for the bottom. This is because most of the time you come to know about the bottom only in hindsight and you may miss the major gains in the market. Those who have cash can start deploying part of this corpus to funds suiting their risk profile and investment horizon. Chances are high that you might see a fall in your investment value for a brief period of time. Nevertheless, if you have an investment time horizon of one year and more you will reap benefits the current situation will spin in the coming months or years.
History has proven it time and again. Those of you who are fully invested and do not have cash can use part of the investment in your debt fund to increase exposure to equity. Again you should use a systematic transfer plan to deploy your cash. The current situation is a very low probability event that you see once in a decade. Our advice is to make the most of it and stay tuned for an experienced leader like DSIJ for guidance in such difficult times.
SHASHIKANT