There are several questions that one can ask your advisor. These questions include whether its good time to enter or exit the market? Should in exit from debt and move to FD? do I continue my SIP portfolio? and other such questions.
The stock market has been making new all-time highs every other day. RBI raised interest rates successively and gold is not performing well. Given this scenario, what the investors should ask their financial advisor?
There is no good/bad time to enter the market. The equity market always gives an opportunity at all time unless and otherwise, the investor wants to stay for a short period of time. The possibility of getting a negative return shades away if we stay invested for more years in equity. Experts advise investors not to time the market rather time-in the market that gives a better return.
The investor can de-risk their portfolio, if their time to achieve financial goal is less than 3 years. If the time to goal is more than 5 years, it advisable to remain invested and you may invest further in a staggered manner. As the earnings are positive, this can lead to gain in the stock prices.
Again, it is the ideal time to rebalance the asset allocation as the equity market has run up quiet a bit. Assuming, the investor maintains an asset allocation of 70% in equity and 30% in debt. The equity allocation could have topped due to the recent run up in the equity market and the present allocation could be 80% in equity and 20% in debt. It is advisable to book profit from the runner and move it into debt to ensure that the portfolio is well balanced.
The crude oil increase has an impact in the CAD. The increase in crude oil also put a pressure in the inflation and hence RBI is in the urge of rising interest rates in the last few monetary policies. This leaves the investor getting more interest from the fixed deposits.
The best tax efficient investment seems to be debt mutual funds. The debt mutual funds provides an indexation benefit on the investments held for more than 3 years.
Though the 10year G-sec price is trading at 7.782. We are in the opine that the interest rate may go up further and hence it may be better to invest in accrual funds than a duration strategy. People also invest in ultrashort term and medium term funds to get a decent return.
SIP can be continued if the time to goal is long period. If the time to goal is less than 3 years, it is better to stay away from equity and start the SIP portfolio in debt mutual funds to avoid bigger risk.
To accumulate more units through SIP route is getting popular these days. The market may be volatile due to various local and global events.
In the last 7 months, the BSE Sensex started the year with a positive note and was down after the budget announcement on LTCG. This was further down due to PNB fraud case and US-China Tradewar.
However, this started recovering and ended up in July with the positive return of 10%. Though the sensex has delivered a 10% positive return, the midcap & smallcap has delivered a negative return. If the investor portfolio is aligned towards mid & smallcap the overall portfolio returns would be negative.
Sensex Returns Jan-Jul-2018
BSE small cap -13.9%
BSE Midcap -10.4%
BSE largecap 10.4%
Disclaimer: Mutual funds are subject to market risks. This post is not a professional advice in any regard.