In view of negative news around the market, if one who is sitting on funds missed the opportunity to pick stocks at low prices during the March fall and missed the grand rally of the last two months in anticipation of a correction, what is your advice for such an investor? What to do now with the funds?
- Gurudas Aras
One is to have a plan, write it down, keep it on the tackboard on your desk so that you are reminded of it and then act accordingly. The plan could be very simple. It could be to start your SIP of the residual money over the next 12 months. If it is a large sum of money, you may spread it across the next 24 months. The other alternative plan could be that you could invest 25 per cent of your money whenever the market falls by 10 per cent. So, invest that money according to a particular plan.
The actual problem is that if you don't have a well-articulated plan and if you don't write it down, you won't realise it but, you won't act. This is because once the market goes down by 10 per cent, you will be waiting for it to go down further. That is what happened in March 2020. In March, everybody was waiting for it to go down further and then the market made a comeback and made a steady comeback for the next two months. Because now only with hindsight you can say that, oh that was a missed opportunity.
You have to take your chances, but take your chances in a calibrated way, in a measured way. And for that, you need to articulate some plan like - you will invest 25 per cent of your money at a certain decline, you will invest the next 50 per cent on a certain decline. And if nothing happens, then what will you do? Then, you may combine this strategy with the first one that spread your money over 24 or 18 or 12 months, depending on the scale of money. This way, you will also be able to capture a lot of interim declines because there is a possibility that the market can go up or it could go down over the next six or eight or 12 months.
So, you may allocate 50 per cent of your money to an SIP and the remaining money can actually wait for some form of timing, but even that timing requires some plan which you will have to follow. So, devise any plan that suits you and follow it rigorously.