Insights

FAQs on investing in the current volatile market

September 6, 2013 . Vidya Bala

faq
With equity markets in turmoil, you may have plenty of questions on what to do with your equity portfolio and whether you could look at strategies to make your portfolio returns look better. In this article, we attempt to provide answers to some of your frequently asked questions:

My SIPs are sporting terrible returns. Should I stop them?

Stopping your SIPs in a market downturn could be the worst thing you can do to your portfolio. By not allowing your fund to average during the falls, you cannot expect it to deliver returns when the bounce back happens.

Just to illustrate, take a look at the NAVs of Franklin India Bluechip in 2008. Had you simply continued the SIPs, in no time would you have seen a bounce back in your portfolio (with an annualized return of 27%), the next year.

sip 2009
In the same example, had you stopped your SIPs say in June 2008, then your returns as of June 2009 would have been a sad -4.9%! This is for a less volatile fund like Franklin India Bluechip. You would actually average much more in a fund that is more volatile.
So long as your fund choice is good, keep your SIPs chugging. But use the opportunity to sell some laggards too. Prolonged down markets will clearly differentiate the stable performers from the laggards.

Should I invest as lump sum now, as the market is falling?

If you have enough surplus and have a 5-year view then it may not be a bad idea to invest in lump sum in the equity market now. But then what if the markets fall another 10-15% from here? That’s where using triggers helps you invest in a staggered manner.

Consider splitting your surplus into 3 parts and set your own triggers in your FundsIndia account to invest them. Read our article Should you wait for the economy to bottom before you invest? to build yourself a strategy to invest.
But ensure you do not go on averaging indefinitely if the market fall is prolonged. Set aside a surplus and be done with the staggered investment. With a 5-year view, it does not matter if you do not bottom fish, till the very bottom that is.

The markets are swinging every day. Will daily SIPs work better for me than monthly SIPs?

If you are a long-term investor, you really don’t need a daily SIP. Over longer periods of 5 years or so, IRR from daily SIPs in equity funds have actually shown to be lower than monthly SIPs.
That said, if you have enough cash and wish to capitalise on every single fluctuation, then using daily SIPs for short spurts, say for 3-6 months, during volatile markets can be one strategy.

During 2008, daily SIPs done for about 6 months or so, actually delivered marginally higher returns than monthly SIPs. But the benefit was lost if the daily SIP was continued for longer periods.
Also, you need enough cash (to be able to do the minimum investment every single day) for this and should also make sure that you switch to monthly SIPs, once such volatile market is done with.
Otherwise, you will be better off simply using triggers to invest occasionally, along with regular monthly SIPs.

IT and pharma stocks are doing well despite the turbulence. Should I invest in these sector funds?

You may, only if you understand the sectors. IT and pharma sectors in India are export-oriented and have therefore benefitted from the rupee depreciation. It is for this reason, these stocks and their sector funds have done well. Yes, with rupee continuing to be volatile, these sectors may be treated as a hedge to your portfolio.

But then, they should simply be used as diversifiers (together up to 10% of your portfolio) and nothing more. Also, avoid long-term SIPs in sector funds. There is no point averaging when a sector is in an uptrend.

When the market tide turns, chances are that the beaten down sectors will do well. By holding to much exposure to these defensive spaces, you may miss the rest. Besides, diversified equity funds themselves have been upping their exposure to these sectors and you are likely to get some exposure through your non-sector funds as well.

Indian economy and market is underperforming and US looks all green. Should I invest in international funds?

Just as theme funds cannot be your core portfolio, nor can international funds be. International funds offer flavours of different markets and economies and are therefore best used as diversifiers.

While the short- to medium-term returns of markets such as the US do seem captivating, remember such developed markets have not offered more than 5-6% returns annually over a decade. Growth markets like India are likely to surpass.

Also, the current rupee’s depreciation against the dollar and other major currencies has made international fund returns look more attractive than their real performance-based returns.

Yes, use these funds, if you must, to hold stocks/sectors that you may never get in the Indian markets. But be judicious in your exposure. Also, do not forget that there could be other emerging markets, which although equally volatile like India, can deliver superior returns compared with U.S in the long term. Hence, decide where you should place your eggs.

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13 thoughts on “FAQs on investing in the current volatile market

  1. Wonderful! is the only word one can say to your articles.
    Crispy, clear and to the point. No non-sense.

    Hats off madam.

    As commented on another thread, i keep buffer of one monts SIP with me every time, when the markets correct more than 4-5% in a month then i go ahead and invest the amount. It’s a real worthy thing, as you increase your portfolio value at the same time average at good cost.

    Also, Some time ago, i have invested in Sundaram Tax savr and Principal Tax saving MF’s (Not through Funds India), they are out of lock in now(I have done during 2008).
    Seeing at their performance (Comparing to peers, they canbe called a Laggards). Can i come out of it and invest elsewhere? or keep them and remove when nifty bounces to 6000-6100?

    Since i haven’t invested from Funds India so not sure if i can put the same question through your Ask Advisor, hence posting it here.

    Thanks,
    Sunil.

    1. Hi Sunil, Yes, you should consider exiting the said funds as their performance has been lack lustre for a good while. Since you are an active investor with FundsIndia, you can use the ‘Ask Advisor’ feature for your past investments as well. Thanks.

  2. Vidya,

    Superb. You are The Best. The way explanation has been provided, nothing more can be expected.
    I am planning to invest to DSP BlackRock World Energy Fund or JM Asean Offshore Equity and also in Pharma Fund i.e. SBI Pharma or Reliance Pharma for better diversification. So is it the right to enter in these fund or we should wait say 3 to 4 months more.

    Thanks in advance.
    Ranjan

    1. Ranjan,

      Thanks for the compliments 🙂

      It’s hard to give specific fund-related advice without knowing more details about you and your investments. For this reason, we’d like to limit such advisory support to FundsIndia customers whose information and portfolio we have access to.

      I am not able to trace your FundsIndia account information. If in case you do not have an account, I would urge you to go ahead and activate one so that you can get advice and invest in the same place 🙂 Once you have an activated account, you can open an advisory support ticket and get a quick response. Thanks, Vidya

  3. Hi Vidya,

    Not sure if you are the right person, in case not Pl re-direct to right team for action.

    Iam holding an account with yours, with a diversified portfolio, I noticed the “askadvisor” feature and posted 2 queries w.r.to review of my folio schemes only. My first query was replied (by you) on 22-Aug, the next one was not.

    Did post reminders, but no response till now. I did raise a support ticket, but they said the query was not received by your system.

    However got a confirmation everytime in your portal every time after my posting like :”Thank you,your timing has been saved.we will respond by email to your registered ID…etc”, So again 3rd time re-posted the query yesterday also.

    Can you please refer this to appropriate team for action, not sure if other users too face such issue. My account registered in email anand.s@sify.com

    1. Hello Anand,

      Srikanth here. I take a look at all the advisory requests – answer some, and assign others. As of now, all queries stand answered as I see it in the system.

      Could you please do me a favor? If there is a mail that you received from us with ticket number, could you please forward it to me? There might be some crack in the flow and if so, I’d like to identify and fix it.

      Even if there is no ticket number, please forward the acknowledgement email that you received to help me track.

      thanks,

      Srikanth

      1. Hi Srikanth,

        When I posted a query using ‘ask advisor’ link, I didnot get any mail/ ticket number but only a confirmation screen stating that “Thank you. Your timings have been saved.An advisor will get in touch with you shortly, you will receive a mail at your registered Id xxx@yyy.com

        Only when your team replied (first query), I got a email with a ticket number as reference.

        The sequence is as below.

        1. Query posted by me on 21-Aug 1:21PM, email reply got on same day 4:08PM with ticket ref #34581

        2. since your query space restriction was 800 characters, had to split my query, post as second query on 22-Aug. For this no reply nor ack mail. I waited for 3days hoping response taking some time

        3. Re-posted same query again on 25-Aug, for second time, no reply

        4. Again posted after 3 days, for third time, no reply

        5. So now posted this to your ‘support’ Ref no #35692 on 05-Sep,10:08AM, received a reply from one Sridharan S at 11:50AM, stating that he is not able to see any pending query, so he asked me to re-send the query.

        6. So again I re-posted this query using ‘askadvisor’ same day 7:27PM (05-Sep), no reply/ack mail to this too. Hence posted it in this blog.

        Oopps, long mail, I can understand that there might be a flow missing somewhere in your webinterface,the point is this may not be the case with any other set of your customers/users and they may perceive differently as poor or lack of support system etc….:-)

        Meanwhile can you provide me a email ID where I can mail my query related to my funds directly instead of re-posting in ‘askadvisor’ for 5th time in a row..:-)

        1. Hello Anand,

          Hmmm…that does not sound good. We have not heard such a complaint from anyone else, and we have been getting tickets. We will investigate this to see what could be happening here.

          In the meanwhile, please send your queries to support@fundsindia.com, with a simple line asking the mail to be forwarded to an advisor. We are a pretty tight knit group, and we can take care of this easily within the different teams.

          thanks,

          Srikanth

          1. Appreciate your quick response.Iam a satisfied customer of your services quite sometime,highly knowledgable team, appreciable web-interfacefeatures, user-friendly interface etc. but here is little frustrating incident happened, not sure where it went wrong.Pl investigate and let me know

            Iam posting my query to your support email ID now.

            Thanks,
            Anand S.

  4. Hi

    Can you kindly tell me which funds amongst these two are best for a long term SIP in terms of consistency, returns, stability, exps ratio, alpha and standard deviation. ICICI Pru Focused Blue Chip Fund and UTI Opportunities Fund.

    Both these funds are listed in your funds selection.

    And I do have one question to you, kindly see below:

    I do remember DSPBR Top 100 Equity fund was in your funds selector earlier, but am not finding the same now. Suppose an investor who sees your funds selector and blogs on the recommended funds and does an sip or lumpsum investment from the day you have recommended that fund. Does he need to exit from that fund now as the same is not showing in your fund selector on the current date?

    So what if the funds you recommend currently now in the funds selector does not perform well in the subsequent period. Will he has to repeat the same steps again as said above to exit the fund and go for latest funds as mentioned in your fund selector.

    I think this will involve too much work for an investor in investing and exit from funds repeatdly

    Kindly reply me looking for your opinion.

    1. Hi Sathish, Fund-specific advice or portfolios are suggested through out ‘Ask Advisor’ feature available to all activated investors. Yes, in our periodic review, DSP BR 100 was removed. It is in a hold and watch category now. That does not mean exit. (exits are done only in some cases when enough leeway is given for the fund to bounce-back and ti does not).
      As an investor, you will be able to know our view if you use our instant review (for funds held with FundsIndia) feature. Also to solve the problem of you continuously monitoring your portfolio, we have Smart Solutions. You will not only receive recommendations on what to hold and what fresh SIPs to add (and what to stop) but also asset rebalancing of your portfolio. With just a click, the recommendations and the rebalancing can be executed. This way you will be privy to all changes in our recommendation and may choose to act upon them. All this is free of cost for our investors and is an automated advisory service. Thanks.

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