Sensex Crosses 50,000: Missed Investing in Equity Funds?

Do you seek inflation-beating returns from your investment? Are you looking to diversify your portfolio with stocks? You could consider putting money in equity funds that invest most of the assets in stocks. However, the BSE Sensex has crossed the 50,000-mark. You may feel that you have missed an opportunity to invest in equity funds. Should you invest in equity mutual funds right now or wait for the stock markets to fall?

Are equity mutual fund investors falling prey to the FOMO factor?

You may consider the fear of missing out (FOMO), which grips investors in equity funds. You could fall prey to FOMO when you have not invested in an equity mutual fund or stock, and it starts running up in a short time. It may impact your decisions, and you could suffer a loss in the stock market. 

You may consider ignoring the FOMO factor if you are new to equity mutual funds. You must remember that 50,000 is just a number, and you must avoid falling prey to your emotions. Invest in mutual funds, depending on your investment objectives, time horizon and risk tolerance. 

You may select a suitable asset allocation before putting money in mutual funds. It is an investment strategy that helps you adjust the percentage of each asset in your investment portfolio. You could balance risk vs reward with the right asset allocation that matches your financial goals, risk appetite and investment horizon.

You could counter the FOMO factor with the right asset allocation to protect your investment. It keeps you safe from emotions such as the anxiety of missing out on a perceived opportunity to put money in equity funds. 

How to invest in equity funds when the Sensex crosses 50,000?

You may invest in equity funds through the systematic investment plan or SIP, even if the Sensex crosses 50,000. It is a way of putting money regularly in a mutual fund scheme of your choice. You may stagger your investment across all levels of the stock market and avoid timing the market. 

SIP helps you enjoy the benefit of rupee cost averaging as you regularly invest in a mutual fund scheme. It enables you to buy more mutual fund units when the stock market is falling and lesser units when the markets rise. You could average the purchase cost of your mutual fund investment, over some time. 

You could invest in equity funds either through a SIP or a lump sum amount. However, you may invest in equity funds through the systematic investment plan when the Sensex has risen sharply. You would find the stock market expensive, and you could stagger your investment in equity funds over a while. 

You must check your asset allocation before investing in equity funds. You could put money in equity mutual funds through the SIP if you increased your portfolio’s exposure to equities. However, it would help if you continue with your SIP in equity funds, even when the Sensex is rising to achieve your financial goals. 

You may consider investing in equity funds only if you can stay invested for the long-run. You may exit your equity funds only if they have underperformed compared to the benchmark index over some time. Review your portfolio once every six months to check if your investments match your financial goals and risk tolerance. However, you must avoid buying and selling equity funds, every time the stock market moves up or down. In a nutshell, you may invest in equity funds for the long-term and control your emotions, even when the Sensex crosses 50,000. 

For any clarifications/feedback on the topic, please contact the writer at cleyon.dsouza@cleartax.in