With the economy slowing down and the investment products failing to meet the returns, it is normal that makes you feel unsure about the market conditions. It is a stage in the economic phase, and you have to make sure to look at your financial goals and portfolio carefully to avoid coming to any mistake. The following points might help you to take care of your financial position and overcome the difficult times.
Investing in Installments:
When the market is volatile, investors may find it risky to invest. Let us assume you’re investing a lump sum amount of Rs. 1.2 lakh in a mutual fund of Rs. 100 at net asset value and the market falls. It will impact negatively on your whole investment corpus. Hence, the best way to invest during unclear market conditions is by breaking the amount and investing in the form of instalments. For example, if you invest Rs 1.2 lakh in a liquid fund and start an SWP (Systematic Withdrawal Plan) to invest Rs 10,000 for the next 12 months. It will allow you to get the benefit of rupee cost averaging and minimize the impact of market volatility as your investment is over 12 months.
Don’t stop SIPs
Discontinuing the SIPs in the case of a downturn is perhaps the major mistake an equity investor can make. It setbacks the purpose of the SIP by denying the opportunity for an investor to accumulate more if the prices are low. The concerns of the investors are understandable by the financial institutions so that they can avail the necessary benefits from the investments. Data from mutual fund tracker Value Research shows that SIPs in 2 out of every 5 diversifies the equity funds that were started three years ago. These funds are in the red today.
Opt for less volatile funds
Hybrid funds are best to protect the downside for the investor In the prevailing market situation. These funds are mainly structured to limit the volatility in returns and suit the investors who can’t handle the ups and downs, yet need some exposure to the equity of funds. Hybrid funds come in various flavours in which the investor can choose according to their own needs.
Balanced advantage funds or Dynamic asset allocation or invest across equity and debt, fluctuating in the exposure to either segment from 0 to 100% that completely depends on the prevailing valuations of the market conditions. Therefore, these funds will strike towards either end of the asset range to contain volatility. Balanced advantage funds also comprise some element of arbitrage over equity derivatives.
On the other hand, Multi-asset funds invest across gold, equity and debt in varying proportions. These are subjected to a minimum for each segment of funds. These kinds of funds afford a higher degree of asset diversification under one fund variety. Another category is equity savings funds of the hybrid nature. The equity components in Multi-asset funds are a mix of equity derivatives and shares together, that comprises at least 65% of the financial portfolio of the investor. You can invest the rest of the amount in fixed income avenues. The lower direct equity numbers will make the funds less volatile even as they benefit from equity taxation.
Stay Insured
You have to be ready to face stark financial challenges, if you are not ready to face any unforeseen risks like hospitalization, an accident, etc. Irrespective of the stable market conditions, you have to be very careful in making your financial decisions. The only way to stay financially sheltered from such threats is by getting insurance coverage that is suitable for your financial needs. For instance, consider taking a comprehensive health insurance plan for health-related risks with an adequate coverage amount for yourself and your dependents such as your family members or parents for unmarried individuals. Likewise, you must also get a life insurance cover to ensure your family doesn’t suffer financially after your demise.
Stay low on debt
It’s better to stay short on debt instead of taking the leverage when you are unsure about the market. You will find it challenging to repay the debt if the situation worsens— something that can easily spoil your financial goals. You have to be sure that the market is stable, you can take the help of debt to leverage your finances to achieve your major financial goals on time.
Diversify your Investments
It is always a better idea to diversify the portfolio in order to reduce the risk. In the times of any uncertainty, investors tend to collect to their safety in investments such as gold. It is evident and reflects in the sharp rise in the price of gold in the last few months. Experts say that the investors should keep around 10-15% of their portfolio in gold. Investors who have taken some gold exposure would have been partly affected by the recent slump in the equity market.
Avoid Investing in Property
Housing finance companies and builders are alluring buyers with huge discounts and low rates in the loans. The housing market in the top Indian cities also has not performed well in the last one year. Given the forthcoming threat of an economic slowdown, the situation is doubtful to improve in the next few quarters. Builders are sitting on big inventories that will take a long time to clear.
Therefore, by following the above points and solutions, you can easily secure your future and your family with secured investment options. However, you have to be very careful in making the right decisions at the right time. It will be more beneficial if you examine all the investment options and do thorough research about the type of investment that you are going to invest in.
It will be more beneficial for you if you’re looking to save your hard-earned money in the right investment choice for you. At the same time, you have to be very careful in choosing the right solution options for you.
