The year 2024 is about to end in another six weeks. Investors are looking for different ways to maximise their gains in this Calendar year, while capping the losses to the bare minimum. With stock market indices in a free fall where Nifty has already declined 10 percent on FII sell-off, what should investors do to make sure their investment remains secure and the gains are ramped up.
It is worth recalling that the foreign institutional investors pulled out a whopping ₹94,000 crore (around $11.2 billion) from the Indian markets in October, the highest-ever, triggered by the high valuation of domestic equities and attractive valuations of Chinese stocks. The outflow took place after a nine-month high investment of ₹57,724 crore in Sept this year.
These are some of the tried and tested investing tips given by wealth advisors of all hues.
When the market falls, investors get a massive buying opportunity. Nifty has dropped over 10 per cent from its record high of 26,277. As a result, there are several blue chip stocks available at attractive valuations. Mutual fund investors are also highly recommended to consider buying more units.
"2024 was a year of roller coaster. A lot of local and global events happened and due to these events market was volatile. Since the last couple of months, we have witnessed correction after a strong rally. In such cases, sticking with a strategy of asset allocation is useful in long-term wealth creation. This is a good time to make some staggered lumpsum investments in equity asset class to balance your asset allocation. Additional lump sum and ongoing SIP can help you to collect more units now and in the next bull run, it can help you to give a boost to the portfolio return," says Preeti Zende, a Sebi-registered financial advisor and founder of Apna Dhan Financial Services.
Retail investors who tend to invest in the small doses i.e., SIPs (systematic investment plans) are recommended to continue their SIPs.
When you buy the mutual fund units during the market fall, the average price of units falls, thus improving the prospects of earning higher gains during the bull run. “Do not panic due to the reduction in the value of your portfolio and due to this do not stop your SIPs," adds Ms Zende of Apna Dhan Financial Services.
In view of the market correction, investors can even consider investing in lumpsum in mutual funds as long as their risk appetite is high. “When you find a stock at an attractive price, it is advisable to raise your investment in that stock or mutual fund. However, it is imperative to exercise due caution before you do so,” says Deepak Aggarwal, a Delhi-based chartered accountant and wealth advisor.
If you were tied to a wrong stock or a mutual fund, there is nothing wrong in bidding adieu to it regardless of the loss that you incurred on it. Losing some money is part and parcel of the game. It is important to keep your emotions under check in order to earn higher gains in the long run. Refraining from selling now can lead to bigger losses in the future.
“This is also a good time to trim your portfolio. Come out of regular plans or duplicate MFs or those which are laggards and as well have concentrated risk, as the market is low your tax obligation will also be lesser and you can reinvest this amount at the lower level to benefit more in the next bull run,” Ms Zende adds.
Most investors tend to keep different assets of their portfolio in a pre-determined ratio e.g. equity, debt and gold in the proportion of 60:30:10. This ratio is expected to align with your age and risk appetite.
From time to time, it is recommended to rebalance the portfolio by selling or buying more equity (or debt) as the case may to be. With equity prices falling, it may be good for most investors to buy more stocks in order to raise the proportion of equity in their portfolio and bring it to the previous level.
For instance, if your equity allocation was 60 percent before market fall, and it has now fallen to 52 percent of your revised portfolio, then it may be advisable to buy more units so that your equity allocation again becomes 60 percent of your total portfolio.
To sum up, investors should continue to follow the tried and tested models of continuing with SIPs, rebalancing of portfolio, buying the dips (and sell the rallies) across the market cycles.
As the year 2024 is set to bid adieu with benchmark indices in a free fall, the rules should not be any different.
