Currently, redemptions in the market have gone up while new investments have slowed down. Moreover, people are also withdrawing money from fixed income mutual funds while many are pausing and cancelling SIPs.
Bharat Ravuri, MD, Principal MF shared his thoughts on how to deal with volatility at the Cafemutual Confluence 2020 Investment Marathon.
Ravuri underlined the fact that the equity market has recovered each time after events of extreme volatility like 1992 Harshad Mehta scam, the 2008-2009 global financial crisis, 2016 demonetization and very recently the covid 19 pandemic.
“In the last 20 years, the market has corrected on three instances between 5%-10% and 14 times for more than 10%, which is almost once every year. So it is not like this is the first time we are facing volatility. In my experience, the market bounces back after every dip,” said Bharat.
He believes an investor’s focus should be on a destination and not on the mode of travel. Markets may go up and down but what is important is life goals and needs.
He shared a few tips on how to counter volatility. First is investing through SIP- the longer you hold the SIP the stronger the returns. Besides, SIPs give more units in the discounted market, adds Ravi.
Another strategy that can counter volatility is diversification. Over the last 15 years, between stocks, bonds and gold, there is no single asset class that has performed consistently across cycles. Every asset class works differently in different economic situations. Hence, it is important to have a diversified portfolio to reduce risk.
Talking about dealing with volatility, he says #ItihasGawahHai is a campaign by Principal MF that educates people to deal with volatility.
