The pandemic has been an ordeal for all but what is interesting to note that amidst all these uncertainties the Indian equity markets have gained nearly 20% in the April – June quarter (Source: BSE). While the rally has been an uptick post the terrible downturn of the markets in the January – March quarter, it is important to note that there is a lot of foreign investments which have come through and the rally is not necessarily driven by economic recovery of Indian companies. One should expect the volatility to continue as the extent of the real impact on the economy and its subsequent revival is still some time away. No one knows yet, but we know that we surely will come out of this, and the economy will revive.
In such times investors tend to either panic because of sudden drop in the markets or some try to time the market. As tempting as it sounds to time the market and try and predict the tops and bottoms of the market, no one has ever got it right over a period of multiple time horizons or market cycles. Even professionals have not got it right let alone laymen investors. Hence what we strongly subscribe to is the "time spent in the market" instead of “timing the market”.
The current global crisis is a significant event which has impacted businesses across the globe. So the impact and recovery phase will be long drawn. What one should do is stay focussed as an investor is the fundamental reason why they had invested in the markets. You would have invested with a certain financial goal in mind, and unless you have attained what your goal was or an exigency, one must strive to be resilient through these testing times and stay invested.
We have enough historical data points in our Indian equity markets and mutual funds where one can see the troughs and the crests and get the negative and the positive returns view. Also it may be wise for one to follow the SIP (Systematic Investment Plan) route in equity mutual funds. The reason for advocating Systematic Investment Plans is because it averages out the ups and downs in the market and still ends up building wealth for the investor who has kept investing regularly over a long period of time – 5 to 10 years or more. Your investment decisions should be driven by a financial goal, hence, a time frame. And that sole decision making criterion should not be undermined or forgotten under the stress of market movements, whichever way the markets move, northwards or southwards.
While we get through the various stages of unlock down, we must not lose sight of caution and follow the protocols of safety and hygiene for self and our loved ones.
Stay Safe and Stay Invested.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.