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How will the market crash affect my Section 80C investments?

Milind

Milind Vadjikar  |1036 Answers  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Jan 13, 2025

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Asked by Anonymous - Jan 13, 2025Hindi
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For salaried professionals investing in equity, does this market crash affect the benefits of Section 80C investments, such as ULIPs or ELSS, which are tied to market performance?

Ans: Hello;

Anything and everything connected with the market will get affected by market volatility. (ULIPs & ELSS too)

However for investors it is like a grand new year sale.

Continue your regular investments and also do lumpsum, if possible, at every sharp decline.

Only those whose target horizon is near should withdraw their gains from equity funds. They can begin fresh investments for some other financial goal.

Best wishes;
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Vivek

Vivek Shah  |60 Answers  |Ask -

Financial Planner - Answered on Feb 14, 2023

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Should I invest more in stock market because the market has fallen ?
Ans: Hello Ms Nitika,

First of all as an investor and also managing your family finances, you need to answer following questions before deciding on additional investments in equity markets:

1) Goal or financial goal or purpose of doing investment.
This will matter a lot as a goal of child education and retirement needs to see with different perspective and also should have asset allocation and market cap exposure accordingly.

2) Time Horizon of your goals- this is very important as it will help you to select the asset class and it's allocation based on your time period of financial goals. This is where investor makes biggest mistake of misalignment of asset time cycle and goals time period. If you allign this properly, your journey will be quite smooth.

3) Optimum Return expectations on your capital invested-
If you are saving and investing for some better future to fulfill your goals offcourse you will ask something in return which should be respectable higher returns than inflation for long term period( more than 7 years). If you are investing in India than equity return assumptions and calculations should be based on 12% return expectations and debt it should be 6.5%. Remember that you should assume practical return assumptions ( not the highest or what your friend says) as you can put any number in the excel sheet for your mental satisfaction😃

4) Risk taken on your capital-
Risk is a very negative word being taken in india but actually it's the risk appetite and risk acceptance of an investor which makes his outcome/ returns favourable. Understand one thing that if you want high returns you have to assume high risk and there is no option for it or an investor has to be happy with sub optimal returns if he is not ready to take risk.

Risk according to me is the capacity of a person until where and when he will not have any palpation in his stomach and he can absorb the downside easily( both realised and majority of time unrealised).

You should remember one thing that after deciding on above parameters, TIME IN THE MARKET IS MORE IMPORTANT RATHER THAN TIMING THE MARKET. As an investor, wealth is created over a period of decade and have your allocation to equity accordingly and enjoy the journey of markets which is going to be up and down.

After looking at all these parameters you can think of taking allocations to equity stocks or equity mutual funds and decide how much additional allocation to equity stocks or equity mutual funds is comfortable to you. If you dont have any prior expertise in investing in mutual funds or equity markets, its better to hire an advisor to help you do that or start with allocation in Equity Diversified mutual funds which will help you to take exposure in stocks.

And after all that, i would say it's your behaviour and emotions management which will help you create wealth in the equity market.

I hope this helps. Happy investing

..Read more

Ramalingam

Ramalingam Kalirajan  |8005 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jan 20, 2025

Asked by Anonymous - Jan 13, 2025Hindi
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For long-term investors, how does such a crash in benchmark indices like Sensex and Nifty50 affect portfolio strategies? Should they focus on rebalancing?
Ans: Market crashes can trigger anxiety, even for seasoned investors. However, they also present opportunities for long-term investors. It’s important to approach such situations calmly and strategically.

Key Effects on Portfolio Strategy
Temporary Loss of Value
A crash can lead to a drop in portfolio value. This is usually temporary for long-term investors. Patience is critical during such periods.

Increased Volatility
Expect heightened market volatility. Equity prices might swing drastically. This should not alter long-term goals.

Opportunity to Acquire Quality Assets
Market dips offer a chance to buy strong-performing assets at lower prices. Disciplined investing during these times can boost long-term returns.

Importance of Rebalancing
Rebalancing is crucial after market corrections. It ensures the portfolio remains aligned with your investment goals and risk tolerance.

Why Rebalancing is Needed
Asset allocation may shift during a market crash. Equities might decline more than other asset classes, altering your portfolio mix.

How to Approach Rebalancing
Review the allocation of your equity, debt, and other assets. Shift funds strategically to restore the original allocation.

Frequency of Rebalancing
Rebalancing should be done periodically, but avoid overdoing it during short-term market fluctuations.

Avoid Emotional Decisions
Stay Focused on Goals
Market crashes are temporary. Stick to your long-term goals instead of reacting impulsively.

Ignore Market Noise
Avoid frequent monitoring of portfolios during such times. Focus on the bigger picture.

Avoid Panic Selling
Exiting investments during a crash locks in losses and erodes potential recovery gains.

Strengthening Portfolio Post-Crash
Diversify Further
If diversification seems inadequate, add sectors or geographies to your portfolio. This spreads risk better.

Focus on Quality
Allocate more to fundamentally strong funds or stocks with a proven track record.

Increase Equity Exposure Strategically
If the market is undervalued, increasing equity investments could be beneficial.

Tax Implications to Consider
Keep taxation in mind while rebalancing:

Selling equities during the crash may trigger short-term or long-term capital gains taxes.

Review the tax-efficiency of debt funds if reallocating funds from equities to fixed-income instruments.

Benefits of Professional Guidance
Consider working with a Certified Financial Planner (CFP) to:

Assess your portfolio post-crash.
Implement tax-efficient rebalancing strategies.
Stay disciplined in adhering to your financial plan.
Final Insights
A crash in benchmark indices like Sensex or Nifty50 is part of the investment cycle. Long-term investors benefit most when they stay calm, focused, and disciplined. Rebalancing can restore balance in your portfolio and prepare it for recovery. Stick to your strategy and remain committed to your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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