Market volatility: Should you revisit your equity investment strategy?

The BSE Sensex has tanked over 4,000 points since its all-time high of 38,989 in late August. The volatility has been pronounced in recent weeks. Ever since the IL&FS crisis spooked the market, followed by news of DFHL likely to face liquidity issues, the market has seen a roller-coaster ride. Each time hope is rekindled with a couple of days of small rise in the indices, the trend is reversed by adverse news flow on liquidity conditions in the market.

The sudden and sharp slide has come a rude reminder of the dangers associated with stock investing and caused a major flutter in the investing community, especially those who are faint-hearted or have low risk appetite. The steady rise in the stock indices during the past couple of years had many investors ignore market risks and invest heavily in stocks leading to sudden erosion in their portfolio value.

Seasoned equity investors would not have panicked buy would have taken the market fall as a healthy opportunity to buy quality stocks for the long term. However, if you are one of those who have been shaken by the events of the past couple of weeks, is the equity market the place for you to be?

Arvind A Rao, founder Arvind Rao and Associates, feels the sharp market correction provides a good opportunity for investors to revisit one’s risk appetite and assess whether equities is the space they are cut out for.

“One must review one’s portfolios to gauge the impact of such correction on the overall portfolio. This, in turn, will help them relook their risk appetite and understand whether they can continue to invest in equities,” Rao told Moneycontrol.

However, of one is still interested in stocks, Rao warns against investing in equities merely because of the correction. “Don’t take exposure to equities just because media reports and advisors are talking about lower market levels and don’t invest 100% of money available in equities at one go as it is difficult to predict support levels for the markets given the domestic and global environment. One should review asset allocation strategies and look to increasing exposure to equities at current levels in phased manner, in case the allocation to equity is for at least 5 years or beyond,” Rao said.

Santosh Joseph, Founder and Managing Partner, Germinate Wealth Solutions, feels the steep market fall could be an opportunity to build a long-term stock portfolio. “Price fluctuations are normal occurrences, despite the severity each time. One could at best use the deep price corrections as an entry point. Being patient is a great virtue for being a successful investor. Stay quiet in adverse conditions has proven to be a formidable strategy to building wealth,” Joseph said.

However, he advises assessing one’s risk appetite before making fresh investment in stocks. “Market levels reaching highs or lows are best realised in hindsight. Valuation metrics offer a perspective. Therefore, one must consider one’s risk appetite and desired exposure levels in equity to add or put additional money,” Joseph said.
Amit Kachroo, Managing Partner, Aaneev Wealth, advises investors to put in money in a staggered manner in these volatile times. “Logic takes a back seat and investors become jittery and try to come out of the market, which is just not advisable. Do not stop investing at this juncture. In fact one should revisit the goals and make strategies accordingly. One should invest in a staggered way or take the systematic transfer plan (STP) route to invest for the long term. Do your research and then act,” he said.


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