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How to approach investment during market volatility caused by COVID-19 second wave?

  1. I investors should continue SIPs in equity funds irrespective of the market conditions and not to stop.
  2. Investors should refrain from using their emergency fund or surpluses earmarked for short-term financial goals like investing in equity funds.

Indian equities have turned jittery recently due to the second wave of COVID-19 in the country and some investors must be having second thoughts on whether they should continue their investments, especially through the popular systematic investment plan (SIP) route.

In view of this, here are some tips for them (as suggested by experts):

Continue Systematic Investment Plans (SIPs)

According to an expert, investors should continue SIPs in equity funds irrespective of the market conditions.

“Continuing with SIPs during periods of steep market corrections, if any, caused by COVID-19 2nd wave will allow SIP investors to buy units at lower NAVs and thereby, average their investment cost,”.

Those with investible surpluses can also top up their existing SIPs with lump sum investments in a staggered manner,  especially during bearish markets.

“As quality equities are available at attractive valuations during bearish market conditions, topping up existing SIPs during such market conditions will further average investment cost and might also help them in achieving financial goals sooner,” he suggests.

Don’t use emergency funds

Investors should refrain from using their emergency fund or surpluses earmarked for short-term financial goals like investing in equity funds.

“As equities can be volatile in the short term and recovery from bearish market conditions can take significant time, any financial emergency or maturity of short term financial goal occurring during the bearish market conditions can force them to redeem equity investments at loss or avail loans at higher interest rates,”

Don’t make hasty decisions

According to market mavens, investors should not panic in such a situation as that can lead to more wealth erosion.

It’s essential to understand that market condition is only a temporary phenomenon with a severe but temporary impact.

Avoid panic selling

During times of bloodbath, any panic selling should be avoided by small investors, experts suggest.

Retail investors suffer the most if they attempt to exit during such times. Therefore, it is best to avoid these phases.

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