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Sensex lost more than 2000 points in a week. What should mutual fund investors do?


The Sensex 5.78% since Wednesday last week. Yesterday’s large fall was a wake up call for several mutual funds yesterday. They saw that their equity mutual funds lost 2-4% in a day. Suddenly, many mutual fund investors are wondering what they should do with their equity investments?

Mutual fund advisors say investors should brace themselves for some shocks in the coming days or weeks. Liquidity tightening is likely to change the face of the market. Easy money conditions that aided the market are going to vanish if central banks go ahead with their plan. The imminent policy rate hikes are going to keep the market again on a slippery slope. The threat of a war is another threat that the market will have to deal with in the coming days.

The future course of the market will also be decided by the economic growth, virus threat and inflation worries. In short, many factors will keep the market in the negative trajectory. Don’t be dismayed and don’t do anything stupid, many fund managers say.

That may sound like obligatory pre-recorded answers from mutual fund managers. Sure, nobody wants to create panic, but the statement has some merit. If you remember many fund managers have been asking investors to temper their returns expectations in 2022. They argued that the market may correct very soon after that sharp rise in the last two years. The basic idea is that the market may have to take breather for investors to make further returns.

Many mutual fund investors, especially those who have seen only the market gaining in the last year or so, are still in the hunting mode. Many of them believe the market may again go up soon. No wonder, they are speaking about lumpsum investments and exposure to their favourite sectors and themes at every market fall. Go slow- because the market may test your patience.

Finally, what should you do? Stick to your investment plan. Do not alter your plans based on the mood of the market. Such decisions can backfire when the market changes its mood. Go slow. There are a lot of experts who speak with a lot of conviction about market movements. Always remember nobody can predict the market consistently right for a long period of time. So, it is better to be safe than sorry.



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