Good product or Good advice?

Yes the current markets are in bearish phase on account of several global and domestic factors. High crude price is single biggest factors of meltdown.

Firstly, let us understand the current behavior of the stock markets is not unprecedented. In history both domestic and global markets have moved in both directions over a short period of time. So do not panic.
Let us assume that there are two types of investors: investor A invested in equity mutual fund at the peak of the market in January 2008 and has now witnessed erosion of his capital. Investor B was more risk averse and preferred to keep his money mostly in fixed deposits.

What should investor A and B do in this choppy market? If investor A has balanced his investment across different asset classes such as equity or equity funds, fixed deposits or equivalent and liquid cash or build funds then he has less to worry. Asset allocation as a disciplined activity must always precede investment.

The fall in equity market by over 35% provides a good opportunity to enter the markets through a regular, disciplined manner over a period of time. This allows taking advantage of the market upside over a medium term perspective. Mutual funds are very convenient and efficient vehicles to execute this type of investment.

If investor A over invested in equity or mutual funds but does not need immediate liquidity, I would advise him to stay invested he should not keep moving in and out of market. This would further erode his wealth, from higher incidence of taxes and increasing his transaction costs through entry and exit loads.

Investor B should consult his financial advisor who can assist him in allocating his investible surplus in an efficient manner. He must ask question and be satisfied about the process. If there is a choice between ‘good products’ and ‘good advise’ choose the later.

Seek the right kind of advice.
-Bapa Sitaram