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Market In Red: Experts Advise Patience Game For India’s 'Record High' New Investor Base

Be it the stock market investor or the equity mutual fund investor, both are staring at losses, now that Nifty 50 one-year return is negative. Here is what you can do about it, though.

Market In Red: Experts Advise Patience Game For India’s 'Record High' New Investor Base
Market In Red: Experts Advise Patience Game For India’s 'Record High' New Investor Base

If you are someone who joined the workforce a few years back and have started investing very recently, then you must have been staring at losses for the first time. However you are not alone since as per data from depositories the number of active demat accounts in India jumped by 63 per cent to 89.7 million accounts in 2021-22.

On June 15, 2021, the Nifty 50 was at 15,869.25 points, and today June 16, 2022 although the Nifty opened at 15,832.25 points, it still is below its one year level at 15,360.6 points.

Ankit Gupta, CEO and founder, BondsIndia.com, said that many new investors are experiencing a down market for the first time because of the one-year Nifty 50’s return going negative. According to him, the markets are spooked by the high inflation data and there is fear that this might impact India’s corporate earrings and hence may trigger a slowdown in the Indian economy. 

However, there is one silver lining if we check the past market data. Gupta said: “If we check the past 20 years’ Nifty-50 performance in May, it is evident that it has been positive 11 times. The average return for the month of May is around 1.01 per cent gain. Between 2013 and 2021, Nifty-50 has delivered negative returns only once, in the year 2020.” 

Three Things To Protect Your Wealth

According to market experts, here are the three things you can do to protect your wealth in such volatile market situations.

Continue SIPs: Systematic Investment Plans (SIP) are a way of investing in mutual funds systemically at fixed intervals. Rushabh Desai, founder of Rupee with Rushabh Investment Services has advised new investors who have just started investing a year or so ago to have patience with the market, since wealth creation takes some time and does not happen in such a short time period.

“Rather, these new investors can do an SIP top-up (i.e., increase the amount) now that the market is down at the moment. This will help them get more mutual fund units at lower net asset values (NAVs). Even if the one-year nifty/sensex returns are lower at the moment, these new investors should keep in mind that equity investing is always preferable for a longer duration like five years minimum. Having a proper asset allocation plan is also equally important,” adds Desai.

Create Emergency Fund: Investors who have just started earning a few years ago and invested in the market should not be wary about the market giving negative returns. Rather, they should focus on their financial well-being, advised Parul Maheswari, a certified financial planner. She advised these young investors to not invest every earning of theirs in equity markets, but rather divert some funds towards emergencies, because of unforeseen circumstances like loss of job, others.

“As part of financial planning, investors must keep aside one year’s monthly expenses in an emergency fund. This corpus could be invested in a liquid or ultra-short term fund which can be withdrawn in a day’s time and simultaneously earns them 4- 5 per cent return. This corpus could come in handy in the case of a job loss, sudden unforeseen medical emergencies, or any other personal unplanned expenditure,” added Maheswari.


Do Not Go Gambling With Markets: One of the major causes of market investors losing money is that they try to gamble. Recently, Nithin Kamanth, founder, Zerodha shared an interesting highlight wherein he said that retail investors bought in the dip of Yes Bank when it had fallen from Rs 400 to Rs 200, and then again at Rs 100. Now, Yes Bank trades at Rs 10-12. He said that investors try to buy stocks or funds in the hope of making some quick gains and then exit. Sometimes, they get lucky, but sometimes they get trapped in that particular stock or fund. Yes Bank was part of Nifty 50 in 2019 and was excluded from it on March 19, 2020.

“Whenever I have to explain this, I use the activity in Yes Bank in 2019 as an example. The stock price went down from Rs 400 to Rs 10 & with every fall new investors jumped in & many existing investors bought more,” Kamanth said in a Tweet.

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