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September 2018 Correction in Equity Mutual Funds & Markets

September 2018 Correction in Equity Mutual Funds & Markets

This being an eventful week of an eventful month, I would like to share some more thoughts. The equity markets have corrected this week, Sensex by 5% and Nifty by 3%. Over the month both have corrected by about 7%. There is turbulence and some people are worried.  

What do we do now?

I will not preach about staying invested, and keep the SIP going. This is because you already know that. Secondly, just staying invested doesn’t always help. You need to take advantage of any opportunity that shows up. More people who stayed invest in Small Cap stocks over the last ten years lost money, then those who made any money. The BSE SmallCap Index was at 14,200 ten years ago, and now it is at 14,700. This translates to about 0% Returns in last 10 years. So it is important to understand where your stock, fund and fund class is going over time. Yes, time in the market is important, but do not ignore timing either. At least not until you are financially independent. 

A Quick Checklist For You

I found this helpful as I built up my corpus and tried to tackle market corrections. One cannot predict corrections, but one can definitely be prepared for them when they happen.

  1. Do you have adequate cash to take care of your expenses for the next 2-3 years?
  2. Do you have adequate cash lined up to meet your life goals that are due in less than 2-3 years?
  3. Are you free of debt, loans, and credit card out-standings?
  4. Are you still invested in products that payout from your account to middlemen? Find out if so, with free portfolio check here.
  5. Are you invested in line with your risk profile? If not, take a free risk profile analysis here.

If the answers to the above are yes, then take on more risk, and do pump in more into the markets over time. Invest more in each dip. If the answers are no, then figure out a way you can free up some cash without adding up too much risk. Take the help of an advisor who works genuinely in your interest. Avoid the ‘free’ peddlers. After all, if everything is free, you may be the product. 

Happy Investing!