Amid the unwinding of the yen carry trade and growing recession fears in the US, equity investors worldwide are on edge. On August 6, Indian equity markets made a notable recovery, rebounding, also prompted by an interest rate hike by the Bank of Japan, led to a global sell-off that caused the Sensex and Nifty to drop nearly three percent. Many mutual fund investors are now contemplating whether to book profits or increase their SIPs gradually.
Keep Calm!
As volatility persists, experts recommend that mutual fund investors exercise caution and avoid making significant investment decisions, whether buying or selling.
Experts feel making investment choices based on short-term market fluctuations can be risky. The decision to book profits is highly individual and depends on several factors.
Stick with SIPs?
Mutual fund strategies differ from direct stock investing. Typically, you do not aim to book profits, halt new investments, or make significant stock investments based on market movements.
For example, if you’re investing for the long term, booking profits might not be the best strategy.
Siddharth Alok, Assistant Vice President-Investments, Multi Ark Wealth-Epsilon Money Group, said, “As valuations further rise, these sudden down moves might become more frequent. Equity markets’ returns are never linear.”
Long-term investors with well-diversified portfolios and systematic investment plans (SIPs) should continue to stay invested.
“Investors with the ability to hold for the long term should look to invest over the next few weeks of correction systematically in pockets where valuations are not stretched, ” added Sandeep Bagla, CEO, Trust Mutual Fund.
Top Up SIP?
Experts feel that by regularly investing through SIPs and capitalizing on dips, investors benefit from rupee cost averaging, which reduces the impact of market volatility over time.
Also, investors with a long-term horizon should consider increasing their SIP contributions during market dips, as this can significantly boost long-term returns. Market corrections allow investors to buy more units at lower prices, enhancing overall returns when the market recovers.
Experts like Adhil Shetty, CEO of Bankbazaar.com, suggest if investors have additional funds and a long-term investment horizon, topping up SIPs during market downturns can be beneficial.
“Buying more units at lower prices can enhance returns when the market recovers. Ensure that topping up your SIPs does not strain your financial situation. It’s important to maintain an emergency fund and avoid over-committing to investments. If you have limited liquidity and don’t want to take unnecessary risks, regular investments through SIPs can help reduce the impact of market fluctuations,” ET quoted Shetty as saying.
