Investors should watch their portfolio and see which funds are not doing well.(Thinkstock)
The recent stock market crash unnerved retail investors and raised suspicion in their minds whether they should continue with their equity investment or move into fixed deposit instruments for safe and certain returns. Below are four suggestions listed by Morning Star to follow in times of volatility
Practice intra-asset-class rebalancing
Investors can leave the portfolio’s baseline asset allocations intact and, instead, make adjustments within asset classes. While the performance of securities within a given asset class may be directionally the same over long periods, there may be significant variations in performance. Within the equity space, for example, mid- and small-cap stocks have generally outperformed larger names over the past year or so and could, therefore, be hit harder in an eventual sell-off; de-emphasising the former and adding to the latter is a way to take at least some risk off the table.
Don’t try to wait for the right time to get in
Investors should avoid playing the volatility. It’s easy for investors to think that they can do it very well but it is easier said than done. It’s a double-edged sword of market timing — it’s not just about skipping the market highs; if one misses a crash, he/she also misses riding the recovery that follows.
Do not discontinue SIP
To get the most out of a systematic investment plan, retail investors should stay put during volatile times. With every dip in the stock market, the SIP installment garners more units for the investor. This in turn lowers the average cost of purchase.
Clean up portfolio
Investors should watch their portfolio and see which funds are not doing well. Now is a good time to get rid of them. One can compare their performance with their peers and check if the scheme has stuck to the mandate, if not one can have a rethink on it.
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