Sensex Up but Mutual Funds Down - What's Happening?

Ans:

Ans: First of all as an investor and also managing your family finances, you need to answer following questions before deciding on which instrument you want to invest

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 mutual funds and decide how much allocation to 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

Ans: Thank you for your question about the current state of the mutual fund market and whether it is volatile or on the verge of collapse, similar to the time of Harshad Mehta. Your concern is understandable, given the importance of making informed investment decisions.

Understanding Market Volatility
1. Nature of Market Volatility
Market volatility refers to the fluctuations in market prices over a short period. It’s a natural part of investing and can be influenced by various factors such as economic data, geopolitical events, and investor sentiment.

2. Current Market Conditions
The mutual fund market, like any other financial market, experiences ups and downs. Recent times have seen fluctuations due to factors like global economic changes, interest rate adjustments, and pandemic-related disruptions.

Comparing with Harshad Mehta Era
1. The Harshad Mehta Scam
The Harshad Mehta scam of the early 1990s involved fraudulent manipulation of stock prices using bank funds. It led to a market crash and significant financial losses for many investors.

2. Differences in Market Regulation
Since the Harshad Mehta era, market regulations have significantly improved. The Securities and Exchange Board of India (SEBI) has implemented stringent measures to prevent such frauds. This has increased market transparency and investor protection.

Evaluating Mutual Fund Stability
1. Diversification of Mutual Funds
Mutual funds invest in a diversified portfolio of assets, spreading risk across various securities. This diversification helps in mitigating the impact of market volatility on your investments.

2. Professional Management
Mutual funds are managed by professional fund managers who actively monitor and adjust the portfolio to optimize returns and manage risk. Their expertise helps in navigating market fluctuations.

Current Market Outlook
1. Economic Indicators
Current economic indicators such as GDP growth, inflation rates, and corporate earnings suggest a mixed outlook. While some sectors show growth potential, others may face challenges.

2. Global Influences
Global economic conditions, including trade policies and geopolitical tensions, can influence the market. Investors should stay informed about these factors as they impact market stability.

Investment Strategies in Volatile Markets
1. Long-Term Perspective
Adopting a long-term investment perspective helps in weathering short-term market volatility. Historically, markets have shown a tendency to recover and grow over the long term.

2. Asset Allocation
Diversifying your investments across different asset classes such as equities, debt, and gold can balance risk and returns. This strategy reduces the impact of volatility on your overall portfolio.

3. Regular Review and Rebalancing
Regularly reviewing and rebalancing your portfolio ensures it remains aligned with your financial goals and risk tolerance. Adjusting your asset allocation based on market conditions can optimize returns.

Importance of Consulting a Certified Financial Planner
1. Personalized Advice
A Certified Financial Planner (CFP) provides personalized advice based on your financial situation, goals, and risk tolerance. They help you make informed decisions tailored to your needs.

2. Expert Management
A CFP continuously monitors your investments and market conditions. They make necessary adjustments to your portfolio, ensuring it remains on track to achieve your financial objectives.

3. Risk Management
A CFP employs strategies to manage risk and optimize returns. Their expertise helps in navigating market volatility and safeguarding your investments.

Final Thoughts
While the mutual fund market, like any financial market, experiences volatility, it is not on the verge of collapse like during the Harshad Mehta era. Improved regulations, professional management, and diversified portfolios contribute to its stability.

Adopting a long-term investment perspective, diversifying your portfolio, and consulting a Certified Financial Planner can help you navigate market fluctuations and achieve your financial goals. Your proactive approach to managing your investments is commendable.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

Ans: these both are not correlated always, NAV's are not live prices fyi