It is essential for every investor to have annual portfolio goals and plan their overall return on the basis of it.
Rahul JainElections tend to bring out the more emotional side of our personalities.
The 2019 elections are due in another six months and investors have already started prepping themselves up for the D-Day. From what I gather, there is a lot of conjecture, to and fro of information most of which is not duly validated; and I believe in the coming months we are going to be bombarded with such half-baked information more so.
Hence, given the volatility in the markets and the investors nerve being on the brink of jitters, how do you gather your save to face the elections? I have two important tips for you.
• Stick to the original plan of action!
Ideally, it is essential for every investor to have annual portfolio goals and plan their overall return on the basis of it. Your target return can be designed to remain as conservative as 5 percent or as aggressive as 15 percent based on your retirement or savings level. Either way, by knowing where you are at, you can make a better decision going forward.
For example, say your current portfolio has returned 10 percent for the year and your goal is to hit 12 percent. Additionally, let's say you are petrified of the election results and expect a sharp decline in the market no matter who wins. Well, if you have nearly reached your goal and don't want to risk your gains or principal, then it may make sense to reduce your equity positions and raise some cash.
But in either case, do not take any radical decisions to completely alter your portfolio. Counter the market situation with a short-term plan based on your individual analysis and gut instinct than any opinion polls or projections. After all, at the end of the day, it is your money, not your advisors.• SIPs – to save the day
If the last few months have taught us anything, then it is that there is no one clear trend emerging on who will win the 2019 elections. But that nowhere means you devoid your portfolio of a growth trajectory.
I truly believe that the best way to counter and thereby benefit from any market fluctuation is to invest in a systematic investment plan (SIP). A SIP is based on the idea of averaging your investment cost over time. It's the simplest and, yet, the most effective technique of benefitting from volatility. You invest a fixed amount every month and keep doing it for a long time.
When the markets drop, stock prices are low and so are the net asset values (NAVs) of equity mutual funds. Therefore, the sum you invest gets you more units of the fund. Eventually, when you redeem your money, all units fetch an equal amount. However, your gains are higher because of the volatile periods, when you were able to invest at a low price. That's an actual benefit from volatility.
Therefore, in May 2019 -- no matter who takes over the mantel at the central government, I am pretty sure if you follow these tactics, your investment portfolio will smoothly sail through the winds of the central elections.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.