The stock market crash of March 2020 had erased a lot of gains from the mutual fund portfolio. But, then against popular perception and opinion, the reversal started to happen. After falling from January highs, the market has covered a lot of ground. The investors also need to understand that volatility is part of the equity markets. Government policies may take time to be fruitful. The global stock markets may show its own volatility thus impacting Indian markets to some extent.
For a mutual fund investor who has goals to be met over the long term, the current market conditions should not deter them from staying away from the market. Remember, selling units at lower NAVs than the purchase price will be your actual loss. Presently, if the NAVs are down, it is a notional loss.
Investors, especially retail investors in these times, can’t do much about it but are certainly concerned about their portfolio. The only bit of advice most financial planners and industry experts have to offer is to stay calm. The high tide may come but as witnessed several times in the past, the tide will turn and better time will prevail.
Equity mutual funds are meant for meeting long term goals. The underlying asset class i.e. equity is volatile by nature, however, this volatility decreases over time. In short-term it can be highly volatile while over longer period, it reduces and delivers a return in the range of 12-15 percent as seen in the past. For retail investors, equity MF’s fit the bill when it comes to meeting long term goal such as children education, marriage, buying a house or financing retirement. All have different investment horizons and require different investment vehicles. If you’re planning to get married next year, don’t hope to finance it with equity investments made today.
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