1. However reluctant we may be, as equity fund investors, we cannot ignore economic cycles in our investment strategy, as they correct excesses that take place over periods of time.
2. During an up cycle, there is an overall optimism about the future, and economic activity expands on growing consumption and demand, increasing investments as revenues increase.
3. However, there is limited capital available at low costs, and if demand remains high even at higher prices, the up cycle cannot last forever.
4. It collapses and businesses soon reach the bottom, trying to protect against failure, while cutting investment and costs, and looking for demand for their products and services.
5. Boom turns to bust, then moves on to recession, followed by recovery, and back
again, but investors in emerging markets such as ours take time to align portfolio strategies with economic cycles, due to several dominant non-economic factors.
6. While turbulent times in equity shares investment could be tackled through strict stop-loss orders to some extent, equity funds investment requires us to be a strategic investor, as opposed to being a tactical or event-based one.
7. MF investors, who have allocated money to certain specific goals, should stick to the original objective, without getting swayed by market volatility and its cacophony, as your aspirations and goal-posts remain the same.
8. We often tend to lose faith when markets turn volatile, and make rash decisions by getting swayed into reviewing long-term investments on a daily basis, which can be counter-productive.
9. It is, therefore, common for investors to stop SIPs when markets are down, which is self-defeating as it doesn’t allow them to benefit from a period of lower prices.
10. Instead, the key to preserving fund investments in a volatile market is an effective risk management strategy, with focus on "purchasing power" protection instead of "capital" protection, through a diversified portfolio.
11. It's better to be a strategic investor by:-
a) focusing on building long-term wealth,
b) believing that 10 years on, the events that seem catastrophic now will pale into insignificance,
c) blocking out hype and sticking to an allocation pattern, as per one's risk profile, that earns reasonable returns across market cycles,
d) continuing to invest in equity even as market falls and keeping
money aside in debt even if equity market rises,
e) having patience and faith in the power of time to even out losses,
f) not using borrowed capital for investments, and
g) refraining to keep predicting how asset classes are likely to perform during turbulent times and modify the portfolio everytime.
2. During an up cycle, there is an overall optimism about the future, and economic activity expands on growing consumption and demand, increasing investments as revenues increase.
3. However, there is limited capital available at low costs, and if demand remains high even at higher prices, the up cycle cannot last forever.
4. It collapses and businesses soon reach the bottom, trying to protect against failure, while cutting investment and costs, and looking for demand for their products and services.
5. Boom turns to bust, then moves on to recession, followed by recovery, and back
again, but investors in emerging markets such as ours take time to align portfolio strategies with economic cycles, due to several dominant non-economic factors.
6. While turbulent times in equity shares investment could be tackled through strict stop-loss orders to some extent, equity funds investment requires us to be a strategic investor, as opposed to being a tactical or event-based one.
7. MF investors, who have allocated money to certain specific goals, should stick to the original objective, without getting swayed by market volatility and its cacophony, as your aspirations and goal-posts remain the same.
8. We often tend to lose faith when markets turn volatile, and make rash decisions by getting swayed into reviewing long-term investments on a daily basis, which can be counter-productive.
9. It is, therefore, common for investors to stop SIPs when markets are down, which is self-defeating as it doesn’t allow them to benefit from a period of lower prices.
10. Instead, the key to preserving fund investments in a volatile market is an effective risk management strategy, with focus on "purchasing power" protection instead of "capital" protection, through a diversified portfolio.
11. It's better to be a strategic investor by:-
a) focusing on building long-term wealth,
b) believing that 10 years on, the events that seem catastrophic now will pale into insignificance,
c) blocking out hype and sticking to an allocation pattern, as per one's risk profile, that earns reasonable returns across market cycles,
d) continuing to invest in equity even as market falls and keeping
money aside in debt even if equity market rises,
e) having patience and faith in the power of time to even out losses,
f) not using borrowed capital for investments, and
g) refraining to keep predicting how asset classes are likely to perform during turbulent times and modify the portfolio everytime.