Some mutual fund investors are planning to sell their investments because of India-Pakistan conflict. They are asking their advisors if they should sell their equity mutual funds and stay out of the stock market for the time being.
“Some novice investors have called me to check if they should get out of equities due to the ongoing tensions across the India-Pakistan border. They say markets have really been quite volatile in the last two days due to the cross border tensions and they expect it to get worse if these tensions intensify,” says MS Shabbir, Founder and Managing Director of SenSage Financial Services.
Benchmark indices BSE Sensex opened 380 points down on Feb 25, though the indices recovered later during the day. Markets slipped by 636 points on Feb 27, and again it recovered partially to close 257 points down.
Undoubtedly, it is an upsetting event but should it be a reason for mutual fund investors to get out of their equity investments? Mutual fund advisors disagree. They say novice investors react to any uncertainty and they forget the fundamental rule of investing in equities.
“There is no point in stopping your equity investments. Equities are meant for long term. If you do not continue with your plan, you will not be able to achieve your goals in time. The idea of scattered investment approach, that is, through SIP is to invest in all kinds of markets and earn an average return. Continue to invest in a staggered manner towards your goal,” says Shweta Jain, founder, Investography.
Mutual fund advisors, in fact, believe uncertain times give you the right opportunity to invest and remain invested to accumulate units at cheaper prices or at discounts.
“This is a herd mentality that when markets are going down due to any uncertainty, investors start taking out their money. In fact, they should understand that when there is a correction, they can buy more units for the same price. It is like buying at a discount,” says Shabbir.
Fund managers say the same. Radhika Gupta, CEO, Edelweiss AMC, in her recent tweet urges investors to continue with their investments during corrections via SIP to earn blissful returns.