I got worried when the stock market fell drastically in March and redeemed my mutual fund investments. However, I do not need that money right now and now want to invest it again? What should I do? Also, what do you foresee for the market from here?
- Raj Kumar
The stock market has recovered by around 20 per cent from its lowest level in March. If you redeemed your money at that point of time, you have already incurred a loss because of your action. Your decision should be based on whether or not you need this money over the next five years instead of what I or someone else foresee about the market from here. There are lot of uncertainties right now.
Markets are going up because of the liquidity as central banks have reduced the interest rates across the world. And also because people think that the impact on earnings of companies will last only for a few quarters. But if the situation prolongs, the stock market may be different than what it is right now. But it is very important to invest in equity because the interest rates on fixed-income options have fallen. And I feel if you invest today with a time horizon of five years or more, you will be able to get good returns.
So, I would suggest if you do not need this money for the next five years or so, then you should definitely reinvest it in equity funds. But because you have incurred this loss, spread the investment over the next 10-12 months. Also, if you think that you may need it little before that and considering the fact that you got anxious when the markets fell, go for aggressive hybrid funds instead of multi-caps. These funds fall less when markets fall.