Financial maturity under professional guidance helping Investors sail amidst uncertainty

Khyati Mashru Vasani
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Khyati Mashru Vasani

A ship in a harbor is safe, but that’s not what ships are built for. Just like harbor is needed for the ship to know where it has to reach at the end of the journey the same way your financial investments also need a clear pre-decided goal to know its ultimate financial destination. The COVID-19 or coronavirus created a different reality experience for the people around the world and the market also felt the same emotions when the volatility hit the market with the storm this March 2020 and the ripple effects of the same continues to influence the markets and lives of people globally. 

With the economy losing its track, businesses facing loss and forced to cut jobs of people and such salary and business income cuts have compelled people to rethink their SIPs.

The latest released data from the Association of Mutual Funds in India (AMFI) highlighted how the SIP inflows contracted in June from Rs 8,123.03 crore and fell to Rs 7,927.11 crore in the previous month, creating a drop of almost around 2.4 percent.

Major redemptions happened in the large and multi-cap fund segments where they saw an outflow of Rs.212.78 crore and Rs.777.60 crore respectively. The Mutual-fund industry has given the facility of pausing SIP to Investors and that option has also somewhere contributed to this.  

Whereas debt funds saw net inflows worth Rs. 2,862 crore which is considerably lower than the last month's net inflows of Rs. 63,666 crore. Liquid funds saw an outflow of Rs 44,226.23 crore while low duration fund and corporate bond fund saw an inflow of Rs 12,235 crore and Rs 10,737 crore. Credit risk funds continued to see outflows as investors withdrew further Rs 1,500 crore from the category.

Looking back at some of the major stock market corrections in India, most of them were driven by financial market excesses or economic disruptions of some sort, with a prolonged impact on the market sentiment. And along with the global market correction the Indian markets as well have to bear the brunt on such occasions like Asian financial crisis-1997, the dot-com bubble of 2000, Sub-prime crisis of 2008 and who can underestimate the present coronavirus crash that has slow down the economic growth due to the large-scale travel restrictions, the commencement of lock-downs in multiple countries and curtailment of outdoor activities making a compelling situation to do authentic risk-profiling before entering into the investment arena. 

Point to notice here is that the investment stoppages are more in the value, small and mid-cap categories as many of these have not shown very good market performance on a five-year basis which is a sort of threshold for retail investors in general. But the thing to understand at this point in time is that SIPs accumulate more units in falling markets and actually outperform lump sum investments in such conditions. 

With interest rate reductions and uncertainty in other sectors like NBFCs and real estates, stock markets are becoming an increasingly lucrative avenue for capital inflows. While it is a good opportunity to enter the markets, caution is advised. As a mature Investor, you need to sail your financial ship under professional financial guidance and maintain your emergency fund along with life and health insurance to keep your financial foundation strong and enter the market in a staggered manner in a systemic way. Do your calculations considering your financial life as you continue your SIPs with enough diversification across sectors unless there is a problem with your jobs or incomes as this kind of market cycle is an opportunity to not miss through SIPs with proper asset allocation for around 7-8 years or more will help you reach your determined financial destination.

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