STRATEGY FOR MUTUAL FUND INVESTMENT IN ADVERSE MARKET CONDITION

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STRATEGY FOR MUTUAL FUND INVESTMENT

Mutual fund investor become panic because of negative return in last one and half year in equity mutual fund scheme and rough market behaviour.Those who invested through Systematic Investment Plan (SIP) in the last one or two years in equity mutual funds are staring at negative returns now. Many regular investors are reaching out to their advisors for reassurances. Many direct or DIY investors are looking around for advice on what to do with their loss-making investments.

STRATEGY FOR MUTUAL FUND INVESTMENT

Investors should try to avoid taking impulsive decisions based on the performance of their equity investments in the last one or two years. Investors should understand that the market is going through volatile  phase where all equity schemes are impacted and there is nothing much to do at this point except for holding on and continue with the investment plan.

STRATEGY FOR MUTUAL FUND INVESTMENT

Break habit of impatience –

Most mutual fund managers and advisors are talking a lot of about investor behaviour these days. They believe investors should modify their behaviour if they want to create wealth. That means you should start paying attention to your impulses (or biases, in behavioural finance) to find out why you act in a certain manner in a situation. For example, is the pessimism all around is adversely impacting your resole to continue with your investments? Or are you getting carried away by the exuberance in the market? Take a breath, become aware of your emotions, think about it clearly, before taking an investment decision.

Diversify your investment –
The mutual fund industry is advocating goal-based investing these days. If you follow the strategy, you would end up with a diversified portfolio. This will help you to tide over tricky situations like the current one. For example, you are supposed to choose various debt mutual funds to take care of your short-term goals, and equity mutual fund schemes for your long term goals. If you follow this strategy, you would notice that when one asset class (for example, equity) is not performing well, another asset class (for example, debt) is doing well. This will offer you more confidence about your investments.

Don’t loose your temptation –
Investors should avoid the temptation to fall into the habit of tracking the markets and the mutual fund portfolio minutely. They believe such obsessive behaviour might have an adverse impact on their investment decisions. Stick to the habit of reviewing your mutual fund portfolio only once or twice a year. And leave the job of tracking the market closely to the fund manager.

Keep your aim Clear –
Don’t try to chase returns by jumping from one scheme to the other or one asset class to the other. This strategy is not going to make you extra rich, say mutual fund advisors. You would find over a long period that you ended up making only average returns. That is why most mutual fund advisors ask their clients to have realistic returns. You are unlikely to make huge extra returns than the market.

Wait and watch –

Investors should always be mindful about their biases and keep reviewing their behaviour. This will help investors to reign in their impulsive investment decisions, say advisors.

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