Ever since Coronavirus became a global threat, the financial market is facing a downfall. Global economies are experiencing the worst ever hit and stock exchanges of all major countries are entering a bearish phase. India is no different and now that Coronavirus has been declared a pandemic, the markets are seeing heavy losses due to international fear of the disease. Moreover, the 21-day lockdown imposed by the Government is making investors restless. This volatility is becoming a cause of concern for investors as they fear the loss of their investments.
Amidst such threats of the disease, lockdown of business and bearish markets, your clients must be jittery about their market-linked investments. As a financial advisor you can reach out to your clients and help them handle the market volatility. You should educate your clients about the right investment strategy in such bearish markets so that their losses are minimized. Here’s what you should advise your clients in the current scenario –
- Mutual funds offer good returns over a long term period
If your clients have invested in mutual fund schemes, the current fall should not bother them too much. Mutual fund investments are done with a long term perspective. Though the market is falling in current times, the fall is not expected to persist over a long term period. Over time, the market would stabilize once the virus is contained. Thereafter, the market would correct itself and grow to yield good returns. So, your clients’ mutual fund portfolio would eventually give good returns if it is left invested over a long term period.
- Mutual funds diversify the risks
Mutual funds invest in a wide variety of stocks and though some stocks might experience a steep fall, others might not. This diversification cushions the loss in the value of the portfolio. As such, mutual funds do not suffer a heavy loss even in falling markets.
- Falling markets is an investment opportunity
As the market is falling, the NAV of mutual fund schemes would reduce if the value of the portfolio reduces. This would actually be a good time for your investors to invest in mutual fund schemes wherein they can buy the scheme at a lower NAV and get attractive returns when the market corrects itself and the NAV rises.
- Profit booking can be an option
If your clients are fearful of losing the returns that they have accumulated in their mutual fund schemes, they can redeem their funds and book their profits before the NAV falls in the face of falling markets. This would help them enjoy the returns of their mutual fund investments without fearing about erosion in the value of their holdings.
- Change in asset allocation
If your clients have a high equity exposure in their financial portfolio, they can review their asset allocation and switch to other investment avenues which are not affected by the financial markets. They can switch their investments to gold, fixed deposits, PPF, liquid mutual funds, etc. for the time being when the market is experiencing volatility.
The recent volatility and fall of the share market is a short-term effect of the international fear of Coronavirus and international markets. Moreover, the lockdown is also expected to limit the rising number of cases being registered. As the international economies are reeling from the effect of the pandemic and industrial production has slowed down due to the lockdown, the markets are expected to be volatile for some time. You should, therefore, advise your clients about the right investment strategy in such circumstances so that their wealth does not depreciate. Do not let your customers panic because a patient approach is all it takes to tide over the recent economic storm. Panic would only result in loss while a patient investment strategy would help in facing the market volatility. So, advise your clients to be calm till the storm blows over and the markets stabilize.
