The key stock market indices have scaled new high on the positive vibe from the efficacy of coronavirus vaccines and transitioning of Biden presidency in the USA. Then there was a sell-off. Mutual fund investors, especially equity investors, get very nervous every time the market touches or hovers around a historical peak. These numbers are psychologically-significant for many investors. That is why many of them ask it is time to sell our investments. Then there is a rush of those who missed the party. They would want to know whether it is too late or is it the right time to start investing in the stock market. ETMutualFunds.com spoke to five advisors to find out what they are telling their clients asking for similar advice. Take a look.
Santosh Joseph, Founder, Germinate wealth Solutions, a wealth management firm based in Bengaluru:
First, to all those investors who are asking whether they should book profits: Please book profits if you canât handle the volatility. The market will not go up in a straight line, it will come down once in a while or more frequently. If you invested a lumpsum and went through the Covid-induced bear market, this is the reward for that. You have 30-40% returns on your lumpsum in six months, you can shut shop.
However, this is not ideal for mutual fund investors who came in with long-term goals. If you pull out the money and push it back after a month for a long term, you might have missed a lot of returns. What I am saying is that you canât time the market, so take a cautious call.
For SIP investors, this is business as usual. Nifty is a 13k, tomorrow it will be a 15k. SIP investors should continue with their investments no matter what happens. Your SIP is doing its job.
If you are a new investor, donât wait for the market to correct to start your SIP, start today. It doesnât matter in the long run. My advice is: long term mutual fund investors should see these milestones as short-term fluctuations and not alter their investment strategy.
Subir Jha, Founder, Buckspeak, a wealth management firm based in Hyderabad:
Focus on your asset allocation. Try to maintain the right balance and donât over-invest in the better performing asset class or fund category. Investors who have laggards in their portfolio, this is a good opportunity to get rid of those weaker funds. However, take the sell decision very cautiously.
Understand whether those schemes are a good value addition to your portfolio. Donât look at short term-returns in isolation. If you donât understand, reach out to an advisor. Most importantly donât fall into the trap of chasing recent outperformers. The funds that are sky-rocketing now can fall tomorrow. Take exposure to schemes that are in line with your risk profile and investment strategy.
If your current equity allocation is significantly (10 %) more than recommended and the portfolio is at least 2-3 years old, only then should you consider profit booking. If the portfolio is more than 6-7 years old and you need the funds in the next 2-3 years, you can exit 30-50 % of your equity portfolio at current levels.
Babu Krishnamoorthy, Chief Sherpa, Fin Sherpa, a financial advisory firm based in Chennai:
See, it is not a profit booking call for all mutual fund investors. Nifty is at 13k but thatâs not the destination. In the coming six months this might come down and we are anticipating volatility in the market. So, in the next 5 years it will definitely be at a much higher level than this. I suggest SIP investors should continue to invest regularly. That is the best you can do in such a volatile market.
However, if you have a relatively larger portfolio, chances are that your asset allocation might be skewed towards equities. It is a good time to fix that. Do it only if the change percentage is substantial. Donât take exit loads and avoid taxation. For new investors, I believe it is not a good time to change strategy or do anything. Your portfolios must be looking better after the fall in the last six months. Continue investing and reach your goals.
Raghvendra Nath, Managing Director, Ladderup Wealth Management, a wealth advisory firm based in Mumbai:
The mutual fund investments are generally long term in nature. Timing the market for a few percentage points may not be worth the risk of losing the opportunity to participate in the growth of long-term wealth.
I would recommend that while one should stay invested in the funds, any fresh exposure can be spread over the next few months or quarters. There might be near-term volatility. So, investors should be cautious.
Maintaining the right asset allocation is more important from a risk perspective. So, if someone is overweight on equities, relative to their comfort zone segments like debt, they may utilise these higher levels to adjust their allocations. On the contrary, if one is underweight on equities one should wait for market corrections to allocate further.
The markets are likely to remain volatile in the months to come, as the near-term triggers for a maintenance of momentum are missing other than the flood of liquidity. In view of this, people with short-term goals should take advantage of the higher markets and exit. If your goal is 1-2 years away, take advantage of the higher levels and book profit. Other than that don’t take short-term tactical calls right now.