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Is It A Good Time For Long-Term Investments?

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Is It A Good Time For Long-Term Investments?
Vishav - 10 April 2020
The investment space has everybody's attention currently with the stock market correcting by around 30 per cent due to COVID-19 pandemic. Despite a recent recovery to a certain extent, markets are at quite a low level raising the question if it is worth considering long term investments during such a market scenario.

According to Harsh Jain, Co-founder, and COO, Groww, what we are seeing in the current markets is not new and that the Indian stock markets have seen quite a few slumps over the past 25 years. However, Sensex has also multiplied nearly 10 times despite the financial crisis and economic downturns, he said.

“Another lesson we can take from the market history is that equity as an asset class can be volatile in the short term but can create wealth in the long term irrespective of market cycles.
So one of the best investment strategies right now would be to invest in SIPs—which help you benefit during any volatility as you buy more units when prices are low and less when the prices are high. If you start now by investing during dips, you will end up accumulating more units in the long run,” he advises investors.

However, according to Jain, investors must keep a few things in mind during such volatile times. For instance, they must have patience and continue their SIPs and let the discipline in their investments work for them. He also advised them not to panic sell as it may lead to making a loss in the market.

“Also, make long-term investments. Once the noise in the market settles down, the markets will get back to focus on fundamentals. Last, but not the least, diversify your portfolio. Keep a good balance by investing in different asset classes (equity, debt, etc.) to minimize risk,” he added.

Most financial experts agree that for long-term investors, the best approach is to invest in equities via SIP mode without worrying about the market fall.

According to Sousthav Chakrabarty, CEO, and Director, Capital Quotient, once the market recovers, investors will start gaining, but one should remember this might not happen in the next six to nine months.

“In this market fall, no one knows how low the market will fall. Hence, rather than waiting to catch the bottom and then invest - investors should opt for a systematic approach to invest. In a rising market scenario also, long-term investors do not get this opportunity to accumulate the units at such low levels,” he said.

The Indian stock markets have been volatile over the last month due to the outbreak and spread of coronavirus across the world which has led to a downfall of the Indian benchmark indices and many stocks have hit their multi-year lows, says Archit Gupta, Founder and CEO, ClearTax.

“However, one must note that this fall is induced by a pandemic and will not prevail. The stock markets are likely to shoot up once the coronavirus is contained. Therefore, it is a good time to invest in stocks and stay invested over the long term (five years or more). This will provide the benefit of scale in the long run,” Gupta concluded.
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