A lot can change in a few months. Until September last year, the Indian stock market was setting new records every day. But since then, all major indices have been in a constant decline.
The Nifty 50 index has crashed about 16% or over 4,000 points from its highest peak scaled in September last year. The BSE Sensex has shed nearly 15% or about 13,000 points since then. The midcap index has fallen more than 22%, while the small-cap index has fallen more than 25% from their December peak last year. In about 5 months, investors have lost a whopping Rs 94 lakh crore.
Amidst such a meltdown in the market, the patience of even the most serious investors can be tested. This is also clearly reflected in the SIP cancellation figures. But what should mutual fund investors do in such times? How should one handle their portfolio? There is no definite answer to this question, but the experience of experts can prove to be very helpful in this matter.
Almost all mutual fund categories, including large cap, mid cap and small cap schemes, have seen massive drop in their funds’ NAV. Large cap funds have dropped up to 19%, mid caps dropped up to 21%, small caps fell as much as 24% in the last 3 months.
Also read: Large-Cap Funds: 28 of 33 fail to deliver even 5% returns in 1 year! Check 10 worst-performing schemes
What strategy mutual fund investors should adopt in a falling market?
First of all, it is important to maintain your basic investment strategy and stick to the principle of asset allocation. This may be difficult for traders, but long-term investors should have faith in their basic strategy.
Apart from this, it is important to focus on risk management. Every asset class has its own rules and limitations, so the portfolio should be balanced accordingly.
There is no need to panic seeing the volatility in the market. Often people change their entire investment strategy by making volatility an excuse, but this is not the right way. Volatility is a part of investing, so it is important to maintain discipline.
Yash Sedani, Assistant Vice President, Investment Strategy at 1 Finance, said, “Mutual fund investors should continue their SIPs and stick to their regular investment plans.
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