What to do during Market Volatility ? – Paytm Money Explains3 min readReading Time: 2 minutes
Mutual fund investing may seem tricky at times; especially during extreme market swings. Even seasoned investors may develop cold feet. To cut the losses, some investors may take spontaneous decisions like pausing SIPs or stopping SIPs altogether. Such quick fixes may be bad for your wealth growth.
Here are a few pointers to stay composed when markets go haywire:
Sticking to one’s investment horizon is necessary irrespective of the market sentiment. It becomes even more crucial to stay invested during market swings since market fluctuations tend to be intense in the short term. These irregularities, however, get streamlined in the long run. By staying invested throughout the entire duration, you enable the fund to realize the power of compounding. As a result, your investments multiply faster leading to wealth accumulation.
Avoid Any Hurried Moves
Making sudden adjustments in your mutual fund portfolio can prove to be detrimental. As humans, we tend to overlook critical details while acting under the influence of fear and greed. Haste may cause you to exit a promising fund when in reality you should have stayed invested. It may prevent you from accumulating sufficient wealth for your financial goals. Instead of panicking, you may want to look for funds that are available at cheaper NAVs.
Look for Diversification
Diversification involves spreading your investments across a variety of securities and asset classes. Having a mix of stocks and bonds lowers the firm-related risks and helps you sail through the turbulence. In case you have an all-equity portfolio, you may want to allocate some portion of your portfolio towards hybrid funds. These may cushion against market volatility while preventing sudden erosion of returns at the same time.
Stay Calm and Be Patient
Behavioral moderation takes centre stage in mutual fund investing. Keep greed and fear at bay and maintain your composure throughout the investment horizon. You may want to limit the number of times you check your portfolio to avoid anxiety. Link your decisions to your financial goals to stay focused and afloat during market swings. You may consult a financial advisor to get a reality check of your investment portfolio to assess if at all it needs any adjustments.
Continue your SIP
SIPs help to reap the benefits of disciplined investing along with averaging out the cost of investments. So, in times of a slowdown, stopping/pausing your SIPs would mean converting your notional losses into actual losses. Instead, continue your SIPs as per the pre-decided schedule. This puts your investments on an auto-pilot mode and keeps you away from the stress of timing the market. You may also step up your existing SIPs to buy additional units of the same fund at lower NAVs.
The Final Takeaway
Market fluctuations will always be part and parcel of mutual fund investing. Instead of getting disheartened, you can deal with it smartly by staying goal-oriented and continuing your SIPs. For starters, you can download the Paytm Money app and get investment ready within minutes and start investing.
Disclaimer: Mutual Fund investments are subject to market risks, read all scheme related documents carefully. Past performance is not an indicator of future returns.