2020 will be remembered as the year that a pandemic ravaged markets around the world. This is a reminder for many investors who have been around more than a decade of the 2008 financial crisis that impacted global markets. People are concerned about their safety and what this could mean for the economy. Our government is doing everything it can to control the spread of the virus. But what about investors? We will answer one of many questions investors have today: Is it the right time to invest with Mutual Funds?
On January 30, 2020, the first case of Covid-19 was confirmed in India. The pandemic began to affect Indian markets in March 2020, as the number of confirmed cases increased steadily. Here's a quick overview of the SENSEX 50 and NIFTY 50 indices for this year.
Nifty 50 Year Till Date
BSE SENSEX Year Till Date
As you can see, the Nifty 50 as well as Sensex saw a huge fall on March 12, 2020. It was actually the worst single-day fall in Indian market history. The Nifty 50 lost over 868 points, while the Sensex lost 2919. What caused this? Experts believe it was due the rising number of coronavirus infections in India. Others blame it on global sell-offs caused by the pandemic. The charts below give a clear picture of recent market conditions. It is hard to predict the extent of this pandemic, with the whole country locked down since March 22, 2020 and an immense relief package from the Union Government.
Although Covid-19 is the most significant reason for the market's decline, there are other factors that have contributed to the market's lack of optimism. In India, the recent problems with the banking system and the financial system. Businesses that are lower up the rating ladder have had difficulty getting credit because lenders and savers both value safety more than higher returns.
You have a volatile market when you add in the drop in oil prices across the globe and the declining Rupee value.
Fact - The Indian markets fell more than 27% in this year.
Lessons from history: before a decade, any drop in the price of stocks of more than 20% was considered to be good news. This was however only true for long-term investors.
Analysis - A drop of 20% or more usually means that stocks can be bought at attractive valuations. This means that you get more value for your money and more bang for your buck.
Suggestion: If you are a long-term investor looking at investing in equity mutual funds, then after drop in stocks can be good time for investment. You should ensure that you choose the right scheme that suits your financial goals and tolerances.
A well-diversified equity fund can be a good option if you don't want to take too much risk due to the market crash. These funds are based on the value investing strategy. Investors must be patient and disciplined with their investments. In a value fund, the fund manager looks for stocks that have good fundamentals and better prospects to grow over time.
It is crucial to realize that the key to investing in these times is choosing the right fund. You need a fund that can weather the storm and help you recover from the current economic crisis.
Remember that markets are volatile. Markets will experience highs and lows throughout their cycles. Markets tend to correct themselves once in a few years for various reasons. A look back at history will reveal that markets almost always recover from these corrections. Here's a quick overview of the Nifty 50 & Sensex over time.
Nifty 50: September 2007-to date
BSE SENSEX: 2007 - to date
You can see that the markets have experienced a number of ups and falls, but have always rebounded and climbed higher.
We believe the virus can be controlled and the world can find its balance. The markets will recover and people will not have to "disturb" each other. Although we might not be in a position to give you an exact time or method, we believe they will.
As your investment partners, we encourage you to consider mutual funds as long-term friends. We also recommend that you invest strategically during this crucial phase. Making the right decisions could lead to good long-term returns. You never know, you might be able to look back and be glad you trusted the markets or long-term investments to get you where you want to go.
A list of mutual funds segregated into different markets.
Aug. 20, 2021 | 3 min read
The power of compounding is a powerful concept and the …
Aug. 21, 2021 | 3 min read
Long-term investments help with securing funds for your future, as …
Aug. 24, 2021 | 3 min read
A mutual fund is a professionally managed money pool that …
Aug. 24, 2021 | 4 min read
There are many types of equity funds, but the most …
Aug. 24, 2021 | 2 min read
Investing in India can be overwhelming with the various options …
Aug. 24, 2021 | 1 min read
The markets, after the nosedive in march due to the …
Aug. 25, 2021 | 3 min read
Debt mutual funds offer investors an alternative to low-risk, fixed …
Aug. 27, 2021 | 5 min read
Do you want to know what percentage of your income …
Aug. 27, 2021 | 3 min read
Read more about what the difference between Alpha and Beta …
Aug. 27, 2021 | 4 min read