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What should mutual fund investors do?
Last couple of months have caused pain in global equity markets, and Indian equity markets in particular
have suffered the most. The BSE Sensex has corrected by over 25% from its all-time high achieved on January 10.
The fall that seems to have been triggered by global macroeconomic concerns has been accentuated by weak domestic data release.
In just two months, the sentiment has slipped from unbridled optimism to morbid pessimism, both being
extremes and hence not sustainable. A situation like this requires an objective and dispassionate assessment of
concerns and positives in the environment. There is no way to foretell when the sentiment will turn, or when the
investor confidence will return. Existing mutual fund investors may be well advised not to allow panic and uncertainty
dictate possibly disastrous investment moves. They need to remain focused on their financial goals and take a long-term view of the market.
The longer one remains invested, the less is the impact of volatility. And for the new investors
looking for price-value gap, these are like rare opportunities on a platter. Investors with a 3-5 year horizon can
take advantage of these opportunities by building an equity mutual fund portfolio using the SIP (Systematic Investment Plan) route over the next 6-12 months.
Using this time tested and disciplined investors can gain tremendously through the benefits of rupee cost averaging. For more conservative investors, Debt funds, Debt PMS or Fixed maturity plans offer a good opportunity with a 12-18 month time horizon.
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