Don’t lose sight of your goals

October 5, 2015

Praveen Kumar V is a Bangalore-based independent financial advisor.

He observes that both the 2000 and 2008 crashes taught investors the importance of diversification. “In 2000, there was a frenzy in the market for technology stocks, many New Fund Offers in the technology space were launched. Then, in the selling that happened, all the money was sunk.”

In 2007, infrastructure was in demand and people got stuck to those funds in 2008-09. So do clients tend to panic and rush to redeem when the market falls? “I have observed that this tendency is higher with clients who have a smaller exposure to markets when compared with HNI clients,” says Praveen.

What should people do to weather such volatility? “My advice would be to focus on their financial goals while investing and not just invest for the pleasure it provides. If the goal is far away, you can stay put. If you have funds, then buy as the market declines to enter at better valuations. If the goal is near — less than five years — then stay away from equities.

“I have had very few calls this time despite the fluctuation in the past week; many have even invested additional sums,” says Praveen. “In 2008, many investors had even stopped their SIPs; but then that was a long-drawn correction that sustained over many months.”

So, is there a greater interest in balanced funds, given this volatility? “Not really,” says Praveen. “We recommend balanced funds for investors with low risk appetite or to those above a certain age. There is no change in the kind of funds investors at large are interested in.”

This article was published on August 30, 2015, in Business Line (The Hindu)