Few Mutual Fund investment facts to clear during COVID-19 jolt!
Due to COVID 19 lockdown, many daily life routines including financial health has come under a recess situation. People are finding it difficult to decide whether they should continue their monthly SIPs or should redeem all of them and keep the cash aside for an emergency. Due to high volatility in the markets and a somewhat similar or worse situation like the year 2008, investors are worry and want to make quick decisions regarding the investments they have made so far. The reason is no doubt an obscure picture of the future right now. As life is unpredictable, so no one knows what is in store for the future, but when we talk about money we can at least guide you to protect your investments and how Mutual Fund investors should not worry in the current market milieu. Just follow the lowdown and read out some facts to keep your SIPs accordingly.
First and foremost question which comes in mind is, should one keep investing monthly SIP or not? So, the answer is don’t panic. If you have certain long term goals and you want to keep some heavy amount of money for the future. Then, keep investing without worrying as this is the time when you can buy more and more units at lower NAVs (Net Asset Value) with the help of your SIPs. Forget about your current portfolio of mutual fund SIPs and keep investing accordingly.
According to Sahil Arora- Director and Group Head, Investments, Paisabazaar.com, “Investors must continue with their SIPs. A bearish market like this, in fact, is a great opportunity to invest, as you can buy more units at lower NAVs through your SIPs. Along with the SIPs, investors who can also invest lumpsum in equity mutual funds in a staggered manner. This will help you create a bigger corpus and reach your financial goals quicker”.
Now, the question comes what strategy one should apply in the current market situation regarding mutual fund SIPs?
First and foremost suggestions by top mutual fund companies’ are- try to redeem your SIPs only after the maturity period. Don’t just panic and redeem all your money. Yes, if someone has lost a job, don’t have any source of income, suffering from some huge financial blockage or health emergency, then it is suggested to redeem the amount of cash you want to have. But don’t redeem all your units of SIPs. In fact, try to buy more at lower NAVs.
“Keep investing through your SIPs and if possible, invest lumpsum as well in equity mutual funds in a staggered manner. But do remember, investments in equity mutual funds should be made with a long term investment horizon of 5 years or more. If you are investing, consider multi-cap funds in this scenario over others, though if you have a low-risk appetite, you may choose large-cap funds. A certain portion can also be invested in index funds.” Says Arora
Remember, not to compromise on your short term surplus or your emergency fund for your investments. Cash is as much important for you along with your health or future goals. So, discuss with your financial planner and then go ahead. Better to redeem only some units of SIPs during an emergency. But that too takes 3 to 4 days at least to credit in your account. Try to invest in such companies from which you can get benefit in the current market atmosphere like low crude oil prices, lower interest rates. Also, invest in such mutual fund companies which have more domestic market exposure than foreign along with high liquidity and margins. Know all the dos and don ts from your financial planner before making any financial step.