With most companies likely to report negative results because of the pandemic, I am expecting that the market will fall. Against this backdrop, do I need to stop my SIPs in Mirae Asset Emerging Bluechip Fund and SBI Small Cap Fund to protect the capital that I have been investing for the last five years?
- Senthil Murugan
The problem is that you may be right and you may be very wrong. Another problem is that you may be right that earnings will come down, but you may be wrong that stock prices will also come down. The reason is that we expect that the earnings will come down, but the market is extremely optimistic as it thinks that all this is going to be temporary - maybe a two-three-four-quarter phase. Prices are down by 10-15 per cent even now as compared to the pre-Covid levels of stock prices or the levels of the index that you see and after that, the market has made a smart recovery.
So, I would say that do not stop your SIPs. If at all you do it, you may be right or wrong and it will translate into a big missed opportunity. Markets keep surprising us. Therefore, I would say that control what is in your hand -diversify your money, be regular with your investment and do your asset allocation. If you think that your entire accumulation in the last five years is to equity, then you may build a 20 per cent allocation to fixed income and follow a disciplined rebalancing approach, which can be implemented say, every six months or so.
To reiterate, we have absolutely no control on the level of the markets and while your theories may be right, they can well be wrong. So, do not make decisions based on such factors.
