If you have carefully taken every step towards investing in the right direction, then here is a reason for you to smile amidst the volatile market situation. Investments in the mid and small cap companies have proved to be far more profitable since that’s the avenue where most diversified funds invest your money into. Mid and small cap shares constitute about one third of diversified fund assets. That is the reason as to why investors fared well during this market cycle.
The Indian share market recorded a decline of 3.4% below its benchmark in the month of July due to the rising inflation, interest rates and debt crisis that is prevalent all round the world and has pretty much led to a change in the investor’s perspective of investing his/her funds. Although the diversified stock funds witnessed a decline of 0.72% since its worst drop in January, investments in mid and small cap stocks saved the day. The reasons for the drop were simple; all investors worry about the following – rising interest rates and high rise inflation. Apart from this growth hampering atmosphere, Indian stocks seemed to have managed pretty well than compared to their global counter parts.
If you are an investor who has been investing in the healthcare and FMCG, you can savor the moment since these stocks have outperformed amidst the volatile market conditions. This was possible only because of investors who still are continuing to invest in these funds regardless of their volatile nature. However, investors who invested in the IT sector were a bit let down. The once booming IT industry in India is also facing a major slowdown. Due to rising wages and a cut throat competition coupled with uncertain economic conditions abroad, the IT sector recorded a decline of about 3% in the month of July.
If you are a conservative investor and do not have a risk appetite to not notice the above mentioned declines, then investment in Gold or bonds can be advisable. With no significant developments in the markets of the European Union and the United State of America, Gold will be one of the costliest commodities. For conservative investors who look forward towards investing in Gold exchange-traded funds (ETFs), will prove to be beneficial since the value of this yellow metal has reached a record high of Rs23, 358/ 10 Gms on July 25 from Rs23, 174/ 10 grams by July 1. Experts are predicting an upward growth in this asset for quite some time in future as well.
Investments in debt funds like fixed income funds and government securities have also witnessed a slight increase 0.26% in the month of July.
Apart from all these upward inclination of the markets, as a prudent investor you must always follow the golden rule – “Do not put all your eggs in one basket”. A tremendous performance of a particular sector should not entice you to save all your funds into them. In the eventuality of a downfall in the market you may end up losing most or even all your investments, if you fail to act with prudence. Settling the repayment of a debt like repayment of a personal loan or a home loan for the next 10-20 years of your life is not something that is desirable. The goal of investing is to save you from the need for borrowing unnecessary credit which can be done by prudent financial planning.
Although it is necessary that you study the market, timing it is not appropriate. It is as equal as gambling where you can get lucky once or twice but not all the time. Continue investing with prudence and follow the SIP route as it increases your investment discipline by nurturing a goal oriented approach.