Stock markets are not for groundless speculation. Anyone intrigued by sharp movements in the stock market knows that this is not a common phenomenon.
Rather than developing FOMO and jumping into stocks without understanding its relative strengths and fundamentals, it is better to assess the potential and then bet according to technical indicators.
The markets are in a special position. There is volatility, fear and a significant amount of hope in a pandemic-stricken global economy.
This, together with the disruptive phase of development due to technological progress and digitization of economies, has put a lot of pressure on traditional companies, which will sooner or later be reflected in share price movements.
Additionally, new winners will come in the form of new-age tech companies that will showcase their strength on the stock exchanges.
For an indirect stock investor who invests money in the companies through investment funds, the right approach is crucial.
There is a risk that you will lose profits that the investors have accumulated over many months. In addition, investors would be only too happy to make a profit, assuming a market correction.
Vaibhav Agrawal, SVP Research, Angel One Limited decodes 5 strategies that a mutual fund investor should consider when investing:
1. Be proactive instead of reactive
It is important to think clearly and avoid clouded judgment, as hasty decisions are counterproductive to investment. Investors also need to calculate risk appetite, and the retail psychology of following the market can be avoided.
Market movers have invested most of the time in various instruments whose moves really matter. If they’re in the market, so should you.
2. Stick to SIPs
Liquidating investments is not advisable when the money is left over. Following a systematic investment plan leaves room for market corrections, which is not the case with flat rate bets.
Markets operate cyclically, which means that if they fall for some reason, they also tend to bounce back. Therefore, based on the current market situation (bearish or bullish), it is never recommended to stop or delay SIPs as they provide average returns over a long period of time.
3. Diversification is key
Putting all your balls in the same basket is never recommended if you don’t intend to lose all your balls at once. Here, balls mean money, and basket means different asset classes.
So if you want to play it safe, you need to identify certain categories and rationalize your investments between them. This ensures stable fund allocation and returns, while avoiding uncontrollable losses during catastrophic events.
4. Timing the markets is unreasonable
Dynamic asset allocation is a proven way to actively manage mutual funds. One way to achieve dynamism is to opt for a Systematic Transfer Plan that gradually converts debt investments into equity investments.
Conversion can be scheduled depending on whether the markets are bullish or bearish. Debt instruments yield interest income, making them market-friendly in a bear market, while stocks do well in bear markets.
The need to rectify often drives investors prey to their emotions, a recipe for unsustainable losses. As with any battle, agility is crucial and can never be overstated, but must be distinguished from haste.
5. Track Market Movements
Most investment funds offer the option of additional investments (lump sum and additional SIPs). This facility can help to increase the total investment.
An investor needs to monitor market movements to make additional flat-rate investments when the markets witness corrections. Such an approach could help increase the total return of mutual funds.
These technological advancements have led to the development of smart strategies to get the most out of all phases of a market movement. There are extremely flexible approaches to calculating regressions and variances between different factors that affect an instrument.
Historical analysis is one of the ways to formulate trends in the market and make decisions based on it. These have determined that market highs are not scary, but very natural.
The markets supported by a logical rate of inflation will undoubtedly reach newer highs over time. Staying vigilant about influencing factors and keeping abreast of the news is what savvy investors do.
(Disclaimer: The opinions/suggestions/advice expressed here in this article are those of investment experts only. Zee Business encourages its readers to consult their investment advisors before making any financial decision.)
This post Wealth Guide: 5 Mutual Fund, SIP Strategies To Keep In Mind While Investing
was original published at “https://www.zeebiz.com/market-news/news-wealth-guide-5-mutual-fund-sip-strategies-to-keep-in-mind-while-investing-181128”