Protect MF in volatile market

How can you protect your Mutual Fund Investment in volatile markets?

Investing in mutual funds can be a rewarding way to grow your wealth over time. However, the volatility of the market can make even the most seasoned investors nervous. This blog details how can you protect your mutual fund portfolio during turbulent times.

Volatility is a part of markets and an investor’s wealth creation journey. You can’t escape it, nobody can, but the wise embrace it and make the best of what the market offers. Market volatility is influenced by several factors, including economic indicators, geopolitical events, and investor sentiment, and it underscores the importance of understanding risk.

Therefore, before you embark on a mutual fund investment journey, it’s important to self-reflect and be realistic about the kind of risk you are willing to take. Based on your risk appetite, you should decide how much market volatility you can withstand and select the asset classes accordingly.

Our Fund Select report suggests the top mutual fund picks for you, based on a comprehensive analysis of the market and in alignment with your risk profile.

There are a couple of important lessons that you must remember during volatile times.

Diversification is the most fundamental tool for lowering the impact of volatility. Spreading investments across various asset classes, sectors, and geographies helps mitigate risk. You can look at allocation in some of the other asset classes, such as gold, debt, etc., to diversify the portfolio.

Choosing the right mutual fund is equally critical. Select mutual funds with a strong performance track record across different market conditions. This will help you control your emotions when the market is volatile and protect you from making rash decisions.

Patience and consistency are your best companions for wealth creation in the long term. The easiest and the most structured way to stay patient and consistent is Systematic Investment Plans (SIPs), which offer a disciplined approach to investing and harnessing the power of compounding. SIPs also help average returns in different market phases. It’s prudent to continue to invest in SIPs despite the market conditions. You can also consider investing in Systematic Transfer Plans. STPs are particularly helpful in times of volatility. STPs allow you to invest lump-sum and then systematically transfer a pre-determined amount in another scheme on a pre-specified date. To know more about our STP calculator, click here.

Another important aspect of investing via SIPs is that pausing or halting investments during volatile markets may result in missed opportunities, as it’s almost impossible to time the markets. So, while market volatility may be worrisome, you must not get swayed by short-term fluctuations.

Staying abreast of market conditions, including macroeconomic developments, sectoral developments, and geopolitical issues, is important and can help you make informed decisions.

Regularly review your portfolio to give yourself a clear picture of how your investments are performing over a long-term period. It may sometimes be prudent to re-balance your portfolio – to move out of underperforming funds and move into better performing ones.

If you are confused about where to begin, you can explore mutual fund options via SC Invest, for online mutual fund investment. Click here for details.