Should Mutual Fund Investors Fear Stock Market Volatility?
Last Updated : March 26, 2020, 10:20 a.m.
Market volatility is a part of investing in stock markets. When one buys direct stocks or equity mutual funds, they should be ready to face market volatility since it is never a linear move-upwards or downwards. There is a saying “ One should invest in stock markets only if he/she has the heart to see his/her portfolio going down by 50% or more”
However it’s important to keep two things in mind:
1) The loss arising out of market volatility is notional and not a realized loss. For example, if you have made an investment for 5 years but after the second year your portfolio is giving negative returns, it shouldn’t matter much to you since your goal is to invest for 5 years and there are 3 more years to go. So, one should not get afraid or fearful of market volatility.
2) We should embrace market volatility and benefit from it-How can we do that? You can by not stopping our SIPs or investing more through SIPs or STPs if possible. Market volatility can help you generate higher returns over a period of time.
