In the wake of the global pandemic bringing the whole world at a standstill, the global economy has been severely impacted. This has resulted in the negative sentiments across investors. Negative investor sentiment often results in panic among investors which further leads to bad investment decisions. Investors are spooked across the world and contemplating what they should do about their mutual fund investments. In times like this, it is necessary to ensure that you are healthy – physically, mentally, and financially. This article offers some tips on how to ensure your financial health during a pandemic.
Don’t let short-term volatilities in the market impact your overall investment portfolio
Stock markets often experience a steep crash and eventual recovery after a global pandemic, and history is a proof of that. Remember the global recession in 2008, also known as the great recession? Definitely, the markets witnessed a steep fall, but remember the saying – ‘this too shall pass’. Eventually, the markets picked up pace. Other similar market trends were witness during swine flu, SARs, and Ebola. It is safe to say that bear runs arising out of such situations are usually short-lived. The markets are likely to bounce back.
Stay put with your mutual fund investments
Asset allocation plays a significant role in determining the performance of your mutual fund investments. If you are a risk-averse investor, you might consider investing in equities. However, if you are a conservative investor, then fixed-income securities such as short-term debt funds, liquid funds, etc. make more sense. Remember, you have put hours of research and analysis of the markets, so do not doubt your investments now.
Talk to a financial expert
We know this is a difficult time and it is always easier to offer advice rather than being on the other side. Experts suggest to refrain from pausing or pulling your mutual fund investments during a market dip. If you end up doing so, you turn your notional losses into permanent ones. However, if you are still anxious about the volatility and its impact on your investments, you might consider talking to an expert. A financial advisor can consult and calm you during these unfortunate times. Experts often warn their investors – “It isn’t too bad to not do anything at all during high levels of market volatility”.
Hopefully, you have understood the importance of staying invested and not letting your emotions and sentiments have the best of you. During these uncertain times, try to follow the old-age saying for wealth creation – Even the world’s greatest investor did not achieve success and become rich overnight. They took their sweet time to invest in mutual funds and gave them the opportunity to flourish at their best. They did not bail on their investments at the slightest hint of market volatility – not even during the Great recession!
Irrespective of the type of mutual fund you decide to move forward with, you are likely to experience both bullish and bearish market phases. The key to successful investing during such chaotic times is to have faith in yourself and your investments. Happy investing!