State Election Results – An opportunity or a risk?
State elections are not something which is new and hasn’t happened in the past. But as always there’s a lot of buzz around how Indian equity market will react in case of an unfavorable outcome. Will market test 10K again on Nifty, is it will a minor correction sustaining for few days only or it will be a much deeper correction, what will have this result an impact on the Lok Sabha Elections slated next year and a whole lot of questions does investor envisage.
Since this website primarily is for retail investors, I would like to discuss such events from their perspective. Investors must not be deterred by such events or any adverse outcomes. Since you are in that accumulation stage wherein every lower level will fetch you relatively more units, you should always view such correction opportunities to add on to your monthly Systematic Investment Plans (SIP), assuming you are invested in quality stocks and mutual funds. A smart investor is one you precisely know how to take advantage of every such opportunity and build on it.
So for you as an investor:
(1) You can look to maintain some additional liquidity to invest in equity markets to take advantage of this downturn.
(2) Don’t even think of redeeming your long-term investments but on the contrary, add on to it.
(3) From liquidity created as part of the point (1), take a Systematic Transfer Plan (STP) to invest at lower levels.
(4) Avoid any lumpsum purchases.
(5) Purchase only quality businesses or funds. Lower quality may have a relatively steep fall but that should not deter you from investing only in quality businesses. Always have a quality portfolio irrespective of which cycle market is currently witnessing.
(6) As part of the point (1), only invest amount which you can commit for the long term. No short-term money for long-term goals.
(7) Be patient with your investments. There can be extended pain but in the long term, it will reap rich dividends.
Smart investors know how to take advantage of all opportunities which market may present time to time. Good quality and cheap/fair valuations can be a great combination for you as an investor. Keep your SIP going and optionally add on to it in this anticipated market downturn.