Stock market sensing correction? Here is what equity mutual fund investors may do now

The stock market indices, Nifty 50 and Sensex 30 are at an all-time high. With valuations becoming expensive, a dip in the stock prices may be expected. Also, with the shadow of Covid-19 receding and economies opening up globally, there could be new challenges to face for the markets.

- Sanjeev Puri

But, for equity mutual fund investors these concerns should be of least concern especially if the investments are earmarked for the long term there will be dips and corrections in the market some of them could be slightly more than normal. However, for a long-term investor, such situations are meant to add more to the portfolio. Markets will never move in a straight line and the more you buy at the bottom or low NAVs, the more the gain when the markets move up over long term.

Equities, as an asset class, tend to drift upwards over the long term. Within equities, rather than investing in direct stocks, choose to participate in equities through equity mutual funds. 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 the short term, it can be highly volatile while over a longer period, it reduces and delivers a high inflation-beating return.

Avoid reacting to the market index every time it goes up 500 points or loses 800 points in 2-3 sessions. It’s absolutely impossible for anyone to predict the movement of markets. Stay from predictors at all costs. Factors affecting market movements have increasingly become more complex, inter-related, and dependent on global events as well. Avoid the temptation to time the market. Rather than timing the market, one should consider, ‘time in the market’. Stick to your plan and make use of the following six points to tide over the current situation.

Keep SIPs running on course