Cut out the noise. Now’s the time to add more to your equity SIPs

By DP SinghIt is said that half knowledge is more dangerous than ignorance. This truism holds true today when you see the amount of misinformation floating around as genuine advice in the wake of the Covid-19 pandemic and the stock market crash. While the advice is well-meaning, there is always a chance that it is only half-true or worse, completely wrong.The Covid-19 pandemic has spread fear throughout the world, with the epicentre now moving to Europe from China. India is also seeing a rise in reported cases every day and in response Indian markets, in tandem with global markets, have seen massive decline to the point of incredulity. At this time, it seems this is the worst thing that markets have ever been through, or at least that’s what the noise around it seems to be saying.Going by the current trend in the market, it is encouraging to know that there is a small section of investors who are unperturbed by the volatility. This is because the retail investors have evolved over time. They have become more aware of reasons for market volatility and what they must and must not do during those phases. However, there is a large section of the investors who still panic and get affected by all the noise around them.The fear being passed around feeds into a culture of panic and over-reaction that has come to define us in this hyper-connected, social media-dominated world. Information is everywhere and becomes that much harder to ignore, especially when it is regarding your health and wealth.Advice that is well-meaning but is misleadingOne piece of advice doing the rounds in these uncertain times is to withdraw lump sum investments and stop SIPs to reduce losses, given the steady and continuous declines in the market that are eroding the value of portfolios. Erosion of portfolio value is disconcerting, but you must remember that this is not the first time that stock markets have faced such fierce volatility and heavy losses.Back in 2008, during the global downturn due to the sub-prime crisis, the Sensex halved to about 8,000-9,000 levels by the end of that year. Investors, who despite advice to the contrary, continued to stay invested through that volatile period would have benefited with the Sensex growing fourfold over the next decade (2008-2018).Historically, markets have endured several events such as the SARS epidemic in 2002, the Chikangunya epidemic in 2006, the H1N1 flu pandemic in 2009, the Ebola crisis in 2014, the India swine flu epidemic in 2015, and the Zika Virus in 2016. The chart below illustrates how the market has survived these crises periods. They have not only recovered the losses, but also have delivered positive returns for investors who stayed invested for the long term.Stay put with your fund or allocate more for your goalsIt is a given that markets will move up over the long term and an SIP is one of the most efficient ways of breezing through such volatile times. Light on the pocket, an SIP will help you continue with your investments and pick up higher units at a lower net asset value. The benefit of higher number of units will be experienced when markets start to move up again.Investors who have SIPs should not panic and stop their investments. For those whose SIPs are about to expire in the coming months, it’s an opportune time to consider taking advantage of the market lows by continuing their investments; adding new ones or choosing a top up in their existing scheme. For investors who have some liquidity at hand, lump sum investments could be considered at these levels. New investors should not try to time the market to look for a more favourable time to start investing.The right time is now and investors could choose mutual funds as the preferred vehicle to benefit from portfolio diversification in a staggered manner. Additionally, stock prices currently are extremely volatile and finding a suitable investment may be timeconsuming and confusing. So, leave it to the experts at mutual fund houses to make appropriate investment decisions for you.Tough times do not last long, Indian economy to recoverIt’s true that the mood in the market is fearful; we are living in uncertain times and can’t fully predict what lies ahead. However, taking cues from the past, investors should look at the long-term scenario.The levels that the Sensex has fallen to was last touched five years ago. Our fiscal and monetary policies have since then expanded to accommodate the growth of our financial markets. This has been supported by growth in infrastructure, investment and consumption, which has been the backbone of the economy, owing to the structural reforms introduced by the government in the last few years. Therefore, we believe our markets and economy should be able to weather uncertainty better than we did in 2015.Further, the Indian economy is expected to see gradual recovery once these tough times are behind us. Moreover, we expect a gradual shift in world supply chain dynamics, as this crisis would force companies to rethink the over-reliance on one country for their manufacturing requirements. We expect India to gain from this supply chain reorientation.The volatility we are seeing today will seem like a small hiccup over the long term. Instead of running away, investors should ride alongside it, and over the next decade, experience the benefits of their patience and resilience. Thus, we urge investors to avoid taking a U-turn on their goals and treat this time as their turn to stay invested.(The author is CMO, SBI MF. Views expressed are personal.)

from Economic Times https://ift.tt/3axMa0K