With the country coping with a spate of negative news like the PNB fraud, bad loans and increased protectionist policies being announced abroad, the effect is showing on our markets as well. After a fabulous run in 2017, Indian Mutual Fund Industry along with the capital markets has been weak and volatile in February of 2018. The industry AUM marginally dropped from Rs 22.41 lakh crore levels in January 2018 to Rs 22.20 lakh crore in February 2018. Overall, the industry received net inflows of Rs 12,092 Crore , largely on account of inflows in equity funds with SIP contribution remaining steady. For the retail investor this means that there is no reason to panic in a volatile market and remember their original objective of investing in mutual funds in the first place.
We at L&T Mutual Fund strongly believe in the basics of investing like financial goals and asset allocation. The beginning of any investment should be always based on a specific financial goal which will typically define the time horizon of the investment as well. Once that is clear, one chooses the type of investment product that one wishes to invest in. In equity mutual funds, the longer time spent in the fund means reducing the risk of ups and downs in the market which then averages the final returns for the investor. Systematic investment plans address this very rudimentary concept of “rupee cost averaging” by investing regularly and over a longer period of time and therefore, help in wealth creation for the investor.
Also asset allocation is another basic rule that all investors should keep in mind. Like the saying goes, don’t put all your eggs in the same basket. This saying is even more relevant for investments. Diversification into different assets classes not just mitigates your risk of being exposed to only one asset class but also helps you to reap the benefits of different asset classes. Diversification must be a cardinal rule followed by retail investors with respect to their financial goals.
Asset allocation involves dividing ones investment portfolio among different asset classes, but the process of determining the mix or the ratio of the asset categories is a very personal one which is also dependant on ones goals, risk appetite and the time horizon to stay invested.
So in times like the current one, when the markets are weak , it is imperative that an investor remains goal focussed and not take any rash decisions looking at the short term events and stay invested in the respective funds as per their original goal or objective of the investment. Also don’t forget that all the mutual funds are managed by professionals who are constantly monitoring and actively managing your funds on your behalf.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.