Stay put in equities! Don’t convert your notional loss into an actual one

Rahul Jain

In my professional career, I have always found capital markets to have a certain rhythm – the ebbs and the crests, are cyclical.

Despite volatility, markets always manage to find their footing. However, investor scepticism with the current situation is evident. The consecutive tanking of the capital markets, for seven consecutive weeks, can leave us all jittery.

Most of us are ready to leave the playing field, given the increasing red in our investment portfolios. But, would this be the right decision for us to make? Would we be penny wise and pound foolish in our decision to quit the equity markets?

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Rahul Jain

EVP|Edelweiss Wealth Management

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In my humble opinion, YES – by leaving the markets now, we would be turning what could be a long-term notional loss, into an actual loss.

Understanding the current market context and challenges:

COVID 19 has virtually brought the global economy to a standstill. Our life as we know it has ceased to exist with a new normal emerging in all aspects, be it personal or business.

Markets, too, have taken a beating amidst this crucial turning point and players are learning to adjust with ever-evolving developments.

With governments across the world seeking new ways to handle the pandemic, the battle will be long-drawn, with measures more systemic and long-term.

With the halting of economic activity and foreign institutional investors (FIIs) pulling out their investments, investor confidence has also hit a low. This is evident in the way markets nosedived in the past few weeks.

Need of the hour: Prudent Wealth Management:

In times like these, where it’s common to oscillate between wanting more and fear of losing it all, prudent wealth management, is the need of the hour. I would personally advise you to focus on managing your income, to ensure enough liquidity for your daily needs.

Do not dip into your savings or investments, thinking that you will replenish them once the markets bounce back.

Times are uncertain, volatility and unsettling, with the bottom nowhere in sight.  In such a scenario, even the most seasoned investor can’t predict how the markets will shape up and by when.

Also, it is a possibility that by the time you are ready to return, there is a high chance of you missing out on the market rally, altogether.

Instead, use this time wisely and take stock of your portfolio. Make sure you have enough liquidity to keep you afloat until the situation eases out and there is a positive uptake in the economy.

Stay aware and consider boosting your equity portfolio with quality stocks at attractive valuations. Revamp your mutual funds by buying more units and averaging out the cost, in the long term. If you have invested in quality funds through Systematic Investment Plans (SIPs), stay invested by continuing your payments.

The current pandemic poses more than just a health risk. It has laid bare the vulnerabilities of several organisations and their viability to sustain growth. Hence, job losses can’t be ruled out.

Instead of stressing, invest in ensuring an emergency corpus to meet your day-to-day needs and essential commitments such as EMIs, credit card dues, school fees, rent, utility and grocery bills, among others.

Markets will bounce back:

Markets across the globe experiencing a slowdown, and forecasts of a recession in the future, are doing the rounds. We can’t rule out the impact on Indian markets as well.

However, I firmly believe that given the sound fundamentals of the Indian financial markets, we will tide the crisis.

Historically, markets and economies have bounced back, after most calamities that have impacted us globally. Also, communities haven’t remained stagnant and its human nature to evolve in the face of challenges.

We continue to evolve, innovate and learn to progress. This too shall pass.

While it is natural for each of us to be worried, it is the time to stay put. Unnecessary panic and ensuing decisions taken in anxiety and haste will only aggravate the loss.Assess your risk appetite, increase your long-term investment horizon and calmly navigate through this phase of uncertainty. Seek advice from your financial advisor as expert guidance can avert mistakes, ensuring that you stay on track to achieving financial freedom.

Stay invested, stay safe!

(The author is Head, Edelweiss Wealth management)

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.