Morgan Stanley Investment Rates Ringgit, Rupiah Top Picks

Malaysia’s ringgit and Indonesia’s rupiah are the most attractive emerging-market currencies to Morgan Stanley’s asset management arm after a selloff drove them to their lowest levels in 17 years.

The currencies are Asia’s worst performers this year as a slump in commodity prices hurts exports and the U.S. prepares to raise interest rates. Morgan Stanley Investment Management predicts the ringgit and rupiah will outperform peers and says developing economies are unlikely to face a repeat of the so-called Taper Tantrum of 2013 when $70 billion was pulled from their bond markets after the Federal Reserve signaled monetary stimulus would be cut.

“Malaysia is the cheapest from our medium-term foreign-exchange modeling in emerging markets, and Indonesia is second,” Jens Nystedt, managing director at the New York-based money manager, said by phone from Jakarta on Wednesday. “Given the selloff that we’ve seen in both currencies and bonds, you’re rewarded to take exposure at this point. India looks attractive but not as attractive.”

A Fed rate increase this year won’t surprise investors and further losses in emerging-markets exchange rates will be temporary as they’ve been declining over the past year, according to Nystedt. Narrower current-account deficits in Indonesia and India put them in a stronger position to endure outflows than two years ago, and both nations are candidates to exit Morgan Stanley’s “Fragile Five," he said. The list of markets most vulnerable to market disruptions includes Brazil, Turkey and South Africa.

“India and Indonesia have taken steps in the right direction given the new governments that have come in to being, and India in particular has been more bold when it comes to reforms compared to other markets,” Nystedt said. The money manager, which oversaw $403 billion at the end of June, also favors government bonds of the two countries along with Malaysian sovereign debt, he said.

The ringgit has lost 18 percent this year as a slump in crude oil prices hurt exports and allegations of corruption against Prime Minister Najib Razak spurred outflows. Najib has denied taking money for personal gain. The rupiah has weakened 14 percent and the rupee has fallen 5.1 percent in the same period, data compiled by Bloomberg show.

Foreign Ownership

Global investors hold 32 percent of Malaysian debt and 38 percent of Indonesia’s, official data show, the largest shares in Southeast Asia. Malaysia’s local-currency bonds handed investors a 2.6 percent return this year, compared with a 5.7 percent gain in Indian debt and a loss of 2.9 percent on Indonesian notes, according to indexes compiled by Bloomberg.

“In Malaysia the biggest risk that they have, in addition to political risk, is really the large ownership of the foreigners in the government bond market,” Nystedt said. “Given that we don’t expect a Taper Tantrum, we think we are being rewarded to take that risk at the moment.”

Futures contracts show a 32 percent chance for a rate increase Thursday, compared with 64.3 percent in December. If the Fed holds off and signals it may raise in October, that will provide short-term relief to markets, with Latin America and Eastern Europe benefiting the most as they tend to be most vulnerable, according to Nystedt.

The Fed will probably take a “dovish” approach amid subdued global growth and Morgan Stanley Investment Management expects only one increase of 25 basis points this year, he said, with the Fed funds rate rising gradually in coming years until it reaches 2.50 percent to 3 percent in 2018.

An increase this week will result in ‘‘a short-term selloff, but then we are taking away a major uncertainty and the market can recover somewhat,’’ he said. “If the Fed makes clear in that this is the only hike this year, and they’re going to be slow and keep rates low, that’s a scenario where emerging markets can stabilize after a day or two of adjustment.” (bloomberg)

4 Investing Mistakes Even Smart People Make

Anyone can make a mistake

We all learn from our own mistakes. But when you’re making critical decisions regarding your investments, any blunder can have serious consequences on your financial future.

Here are some mistakes even the smartest people make — and some proactive steps to guard against them.

A step off your plan could lead to a tumble

1. Going off-plan.

Altering your investment portfolio based on yesterday’s top performer or today’s daily news may end up hurting investment returns. Many studies — including a 2014 report from financial research firm DALBAR, Inc. — have found that individuals who buy and sell stocks on their own often generate lower returns than if they had just purchased and held a Standard & Poor’s 500 Index Fund.

It is important to develop a long-term investment plan and stay the course in order to reach your financial goals. This plan should be designed to provide a clear roadmap for achieving a range of needs and goals, from paying monthly rent or mortgage and saving for college, to investing for retirement, during both up and down markets.

Try not to get carried away by your emotions.

2. Letting your emotions take over your decisions.

The ability to stick with a consistent investment strategy is often jeopardized by fear, greed, and nervousness. These emotions can cause investors to move their money into safer positions and conservative investments which may not grow enough to cover retirement or other long-term costs.

While the financial markets rise and fall without warning, soaring one day and dropping the next, it is vital to stay focused on your long-term investment plan.

And remember, over time, each asset class will take its turn as a leader or laggard. Avoid impulsively selling an under performing investment and stay the course with a diversified portfolio that is able to withstand inevitable short-term rises and dips in the market.

Remain alert when it comes to taxes.

3. Being unaware of how taxes affect your returns.

Be aware of your tax bracket and how tax consequences impact your total investment return. Taxes can greatly impact your investments – both while you are working and in retirement.

If you are working and have many years until you need to access your money, your taxes and strategy are a lot different than when you are retired and pay taxes as you withdraw money from the returns generated within a workplace retirement plan.

Taxes are highly individualized based on financial situations and can often be quite complicated. Consulting with your financial adviser and accountant is a smart strategy to consider in helping to craft a retirement income plan that takes taxes into account.

Try not to be too hasty when adjusting your investments.

4. Changing your strategy due to interest rates.

Interest rates have been held at historic lows since 2008, a move by the Federal Reserve to push down the cost of borrowing and spark economic growth. The Fed has indicated that short-term interest rates will likely increase this year, which could cause short-term stock market volatility and depress bond prices, as rising interest rates tend to push bond prices lower.

Despite these coming changes, do not overreact to market volatility. Higher interest rates should not alter your long-term investment strategy if your assets are invested diversely across stocks, bonds, and real estate. (businessinsider.com)

Malaysia Market Support Seen as Short-term Win

Malaysia has broken new ground in Southeast Asia by ploughing billions of dollars into equities in a China-style effort to lift its faltering stock market — but few predict either long-term gains or a rush of neighbours to follow suit.

The benchmark Kuala Lumpur composite index has climbed more than 2.3 per since Najib Razak, the embattled prime minister, made the 20bn ringgit ($4.6bn) pledge on Monday to boost confidence amid economic troubles and a corruption scandal.

But analysts say the intervention is relatively modest and, as in China, more likely to soften a decline than trigger a boom. While Indonesia has previously used state funds to support its bond market, public government intervention in equities is rare in Southeast Asia, and likely to remain so.

“My sense is that the [Malaysia] measures are more to try and prevent a sharp fall than to get the market to rally,” said Rahul Bajoria, an Asia regional economist at Barclays. “Even in Malaysia, it is a very small level of support, and will probably only mitigate the impact of capital outflows, not offset it.”

The Kuala Lumpur composite edged higher on Tuesday after gaining almost 2 per cent on Monday following Mr Najib’s announcement that the government would inject 20bn ringgit, equivalent to roughly a fortnight’s turnover, into the ValueCap state investment fund.

Malaysian markets were closed on Wednesday for a public holiday. ValueCap was set up in 2002 to boost stocks seen as undervalued. Khazana, Malaysia’s main sovereign wealth fund, also announced 6.8bn ringgit of additional investment across a range of industries.

The announcement, together with Mr Najib’s reassurance that capital controls would not be introduced, buoyed investors ahead of the US Federal Reserve decision on interest rates this week. But the Kuala Lumpur composite is still trading more than 10 per cent lower than its April peak.

Malaysia’s action has highlighted the government’s willingness to use the heft that a web of state-linked companies enjoy in the economy. Mr Najib is embroiled in a scandal over his stewardship of 1 Malaysia Development Berhad, a government investment fund whose advisory board he chaired while it ran up debts of more than $11bn.

Mr Najib, who is also finance minister, has denied wrongdoing over both 1MDB and reports that surfaced in July of payments of more than $675m made to bank accounts in his name. He has denied taking money for personal gain and said the funds came from an unnamed Middle Eastern donor. The country’s anti-corruption commission has confirmed that this was the source.

Some analysts see Malaysia’s stock market intervention as a regional outlier, reflecting the country’s acute economic difficulties. Malaysia has been under greater pressure than most of its neighbours given its high levels of household debt and the impact of falling international energy prices on government revenues. In the past year the ringgit has fallen more than a quarter against the dollar to levels last seen at the time of the Asian financial crisis in the late 1990s.

Euben Paracuelles, an analyst at Nomura, noted that other Southeast Asian countries, including Indonesia and Thailand, were seeking to stimulate their economies with more conventional methods such as tax cuts.

“I think the goal [in Malaysia] is to shore up confidence in the currency, given that the stock market has had significant outflows,” Mr Paracuelles said.

Kevin Kwek, a senior analyst at Bernstein Research, said that while Malaysia’s pumping of government money into the stock market was “not the best option”, it was not “100 per cent bad”. “It depends on how deep the pocket is, and whether negative sentiments outlast resources,” he said.

The allegations around Mr Najib show no signs of going away, with investigations linked to 1MDB under way in Switzerland and Hong Kong, as well as Malaysia itself. The prime minister is under sustained attack not just from the political opposition but from Mahathir Mohamad, the influential prime minister of 22 years who was once his patron. (ft.com)

How Structured Products May Suit Investors

For funds, sector classification can help investors find what they’re looking for more quickly and allows them to judge investments against their comparable peers. For structured products, it’s a similar story in that the different product types are a starting point for investors to consider and identify what they want.

Of course it depends on investors’ expectations of markets, returns and risk appetite.

Bullish – expectation of rising markets

For any investor who is moderately bullish about market prospects over the medium term, a portfolio of growth structured products can complement traditional fund exposure. The former can significantly outperform other investments thanks to geared market participation offered by many such structured products. For example, if over the next six years the FTSE rises by 5% or more, there are growth products that will produce a 60% gain.

Out of the 1,815 maturities of UK retail structured product distributed through the independent financial adviser space over the last five years to 31 July 2015, growth products were the biggest group, making up over half of the maturities.

Looking at the 250 capital at risk products that matured over the period, the average annualised return was 7.66% over an average term of 4.65 years. The average total return was 42.35%. The wide range of returns is evident in the top 25% of products making an average annualised return of 13.69%, while the bottom made 0.15%.

Neutral – slightly rising markets or moderate falls

Most growth or income-oriented structured products are designed to run for a fixed term of typically five or six years, but auto-call or “kick out” contracts can mature early if pre-set conditions are met.

However, regardless of the product type, investors need to be prepared to hold a structured product for the maximum investment term, as while it is possible to sell out early and sometimes it may be advisable to do so, the defined returns of a product only apply at certain dates and outside of these, returns are not easy to predict accurately.

If investors have a neutral market outlook, auto-calls are an option worth exploring, as they can mature on defined dates with pre-set gains in the event of slight market rises, or in certain cases, moderate falls. For those keen to reinvest their proceeds, they can put this money in rollover substitutes from the same provider, another product offer or opt into the markets through other investments.

Auto-calls have frequently been the best performing structured product type on an average annualised return basis, primarily because of their early maturities in rising market conditions. Looking at maturities over the same 

five year period, the 633 capital at risk products made an average annualised return of 9.2% over an average term of 1.74 years. The average total return was 15.01%, lower than the growth products because of the shorter terms.

The top 25% of capital at risk auto-calls made an average annualised return of 13.14%, while the bottom quartile made 5.46%. Therefore, even the bottom 25% of these products made an impressive return for investors, beating the equivalent figure for growth products.

Bearish- falling markets

Arguably, if you’re bearish on where markets are going, perhaps you shouldn’t be investing at all but a structured deposit or capital ‘protected’ product will provide growth if you’re wrong and protect capital if you’re right. Structured deposits are essentially fixed-term deposit accounts, where instead of interest being earned at a set or variable rate, the return is not fixed but depends on the performance of the underlying asset, such as the FTSE 100. They are designed to return investors’ original capital as a minimum at maturity.

As with most UK deposit accounts, structured deposits usually include the potential benefit of protection should the deposit taker become insolvent during the investment term, with recourse to the Financial Services Compensation Scheme (FSCS). UK eligible claimants have the right to claim up to £85,000 per individual per institution in such circumstances. This is dropping to £75,000 from next year.

A capital ‘protected’ product is similar to a structured deposit, but the capital protection is contingent upon the counterparty, the financial institution backing the plan, remaining solvent and if it fails, such investments are not covered by the FSCS.

Looking at the 557 capital ‘protected’ and deposit based FTSE 100 linked growth product maturities over the same five year period, they delivered an average annualised return of 3.95% over an average term of 4.77 years. This equated to an average total return of 20.11%.

Another group to consider are ‘defensive’ structured products, which offer the opportunity for a gain even if the market falls by a predefined amount. For example, an auto-call product offering a gain if the index level on a set anniversary is above 90%, rather than 100%, of its starting level.

While the return profile of these products may not be as attractive as traditional products, they can be a useful portfolio addition for an investor who is concerned about high market levels.

Income investors

The other main group of structured products is income plans. Whilst often a suitable option for those with this priority, just because this is income investing doesn’t mean it is without its risks.

This can be overlooked – as in equity investing, attractive levels of income are associated with more defensive companies – but looking at the difference in quartile performance below highlights the importance of product selection.

Looking again at capital at risk, the 131 products made an average annualised return of 4.56% over an average term of 5 years. The first 25% made an equivalent figure of 7.31%, while the bottom made an annualised loss of 1.94%.

Whatever the product type, each product needs to be assessed on its own individual merits. The defined returns of structured products means that you do know exactly how a product will perform in different market scenarios. This is a benefit to these investments that should be capitalised on and shows how they can help spread risk within your portfolio.

Source - everyinvestor

Alternative Investments: The ‘Alpha’ Solution of the Future?

Before, during and after the opening bell, investors across the globe are in continual search for market returns. But with low yielding, highly correlated traditional asset classes, where are the opportunities to improve portfolio performance? This article offers an insight into the value of investing in alternative asset classes and the potential for them to become the ‘Alpha’ solution of the future.

Understanding Alternative Investments

Alternative Investments (AI) are often misunderstood. This derives from a number of factors, one key influence is the relatively new oncoming of these asset classes. Their popularity with investors has predominantly grown in the recent decades, this along with volatile markets has meant the comprisal of AI has tended to frequently evolve. As such defining AI can be somewhat difficult, but it is commonly expressed that; AI, include those asset classes not considered by the traditional three investments (stocks, bonds and cash). Investors may then look to asset classes, both in developed and emerging markets, below is a non-exhaustive list of these. AI can be further understood through comparing their trading behaviour and looking at characteristics such as liquidity, correlation and efficiency, which directly effect risk-return, diversification and overall portfolio performance.

• Real Estate: Land/ Residential/ Commercial
• Funds: Hedge, Venture Capital, Private Equity
• Commodities: Agriculture, Energy, Precious Metals
• Collectables: Wine, Artwork, Automobiles
• Others: Intellectual Property, Patents, Intangible Assets

Funds

When considering AI, most commonly thought of is private equity (or P.E funds). Private equity investors such as hedge funds and venture capital firms, can be thought of as ‘privately organised investment vehicles’ that use their hedging and leveraging techniques to generate absolute market returns. They may do this by engaging in leveraged buyouts (LBOs), investing in distressed debt and pre- IPO equity. These investors will commonly look to invest in new start-ups and under-performing companies but this will depend on the route taken by the P.E fund. For example, venture capital firms will invest in the early stages of private firms, looking to make high returns once the firm becomes publicly traded. LBOs involve acquiring companies that can be ‘streamlined’ to flip for a profit. The effects of LBOs can be controversial, this may involve the selling of non-essential assets and can result in job losses. Alternatively, improvements may be made, which actually moves the companies market position.

Most private equity funding comes from institutional investors (pension funds et al) and the owners of the P.E fund (usually investment banks), but also HNWI (though to a lesser extent). An attractive aspect of private equity investment is the diversification it offers. Uncorrelated sources of return among AI like private equity are essential in the creation of risk-adjusted returns that do not offset expected return. This is a key driving factor that differentiates AI from traditional asset classes which are comparatively more highly correlated. Private equity investment also boost above average market returns, outperforming public equites. Apollo Global Management, a large alternative firm (US$159 billion AuM), generated 26% net return on all their capital in private equity, during the same time, the S&P 500 was up only 9%. In an interview with the Milken Institute, co founder and harvard MBA, Josh Harris expressed how private equity offers an attractive investment in finding ‘pockets of arbitrage, even in todays overvalued world’.

Emerging Markets

With significant growth and development opportunities in the Asian contient, its no surprise emerging markets offer real investor value. In-fact the GDP growth of India and China in 2014, was nearly three times that of mature economies like the UK. Investing in real assets such as infrastructure investment allows private investors to generate returns through the ‘privatisation of existing infrastructure or by the private creation of new infrastructure’. This is beneficial for both the local development of regions and for private investors looking for alternative sources of return. Estimates from OECD suggest infrastructure investment requirements will reach US$50 trillion by 2030. Traditionally, banks and governments have funded infrastructure projects but with the rapid expansion of emerging economies, private sector investment is becoming increasingly prevalent. Investing in emerging markets carries a unique level of risk, generally due to less stable economic characteristics of developing economies, including changing interest rates and regulation. However, emerging markets remain a core alternative area to invest in and can be hugely rewarding in generating absolute returns.

Caveats of Alternatives

Asset liquidity is a key factor to consider in portfolio management. Due to the nature of AI, they tend to be highly illiquid. Their low trading volume can make them difficult to value and invest in. AI can also suffer from the ‘survivorship bias’. Volatile market conditions mean past performance is not always the best indicator of future performance, so caution should be taken when considering asset allocation. Moreover, in comparison to the more liquid traditional assets, AI tend to lack historical data, unlike stock and bond index’s. Alternative investors should be prepared to take long holding positions, being forced to sell of assets or reducing private equity in the short to medium term may result in low returns or may not be possible at all. Therefore investors wanting to change their portfolios risk profile are likely to encounter difficulties. To generate superior risk-adjusted returns, portfolios should include a balance of both liquid and illiquid asset classes.

Looking to the Future

It would seem alternatives are rapidly becoming mainstream. Research from PwC expresses the macro conditions that are likely to drive this growth in the alternative asset market, to a potential $15.3 trillion by 2020. This would include ‘high performing capital markets, accommodative monetary policy and stable GDP growth’. Whilst ‘rising interest rates, along with normal correlation in capital markets’ would support a more conservative value of $13.6 trillion. Overall, the wide ranging asset classes under the alternative umbrella offer very desirable qualities for investors looking to enhance portfolio performance, improve downside protection and increase diversification. Even so, as an investor it’s always important to consider your investment goals, which directly influences investment strategy and asset allocation, whether that be traditional and/or alternatives.

Source - themarketmogul

9 Ways to Take the Fear Out of Investing

By Nicholas Pell for FutureAdvisor

Investing can be daunting. You’re risking your hard-earned money and the investment world is filled with complicated choices and incomprehensible jargon that can take a lifetime to master. It’s completely normal to feel uncertain — even a little afraid — about investing if it’s new to you.

But, that’s not a good reason to not invest. Truth be told, the idea of reaching retirement age without having grown your savings from their present-day value is a lot scarier.

Losing value to inflation is one of the main reasons investing is critical for long-term financial health. And creating a strong portfolio is essential to building wealth that outpaces inflation and secures your future, especially for retirement. Here are nine ways to take the fear out of investing so you can start making your money work for you.


1. Diversify

Diversification is a core tenet of a strong portfolio. Diversifying means spreading your investments out across asset classes and geography so that poor performance in one category is offset by high performance in another.

Different asset classes do well in different situations, and different regions thrive at different times. For example, if stocks start to fall and all your investments are in stocks, you will be hit hard. If, however, you spread your investments out over stocks, bonds, real estate, and inflation-protected securities, as well as parts of the world, you also spread out your risk. If bundled correctly, a diversified portfolio not only preserves your capital in weaker markets but also can result in stronger returns.

2. Use ETFs, Not Stock Picking

Exchange-traded funds provide the diversification of index funds with the convenience of stock exchanges. With one investment, you can track assets that include stocks, bonds and commodities. ETFs have lower risk and require far less work than picking specific stocks. They also automatically rebalance over time as the economy changes, and they’re tax-efficient. They can be a great option for any investor.

3. Buy What You Understand

There are lots of convoluted investments out there — and lots of investors who get suckered into thinking they need something insanely complex to gain an edge over other investors. While it might seem like a good idea on the surface to have an active fund manager picking investments and creating something “special” for your portfolio, many of these funds don’t beat the market year over year. Simple investments, like ETFs that broadly mirror large parts of the markets, are not only good for your portfolio but also can be easier to understand and can give you additional piece of mind.


4. Pick Your Risk Level Based on Historical Declines

Everyone has a different degree of risk that they are comfortable with based on their circumstances and personality. Going outside of your risk tolerance is a sure way to send fear and stress levels through the roof. When making investments, pick a risk level that you can live with and that factors in historical declines. Then when inevitable dips happen, you’ll be prepared to wait out the low points.

5. Invest With a Clear Goal in Mind

Investment goals are a powerful way to keep you motivated and to protect you from common mistakes that might derail your progress. The first step is to set your goals. Write them down, figure out a timeline for short- and long-term goals, and calculate how much money you want to save. It is important for your goals to be realistic and measurable so you can work toward achieving specific milestones.

6. Write an Investment Policy Statement and Stick to It

Once you have your goals, write an investment policy statement. This statement not only defines your goals and objectives but also describes the strategies that will be used to meet them. An IPS provides the foundation, anchor and benchmark for all your future investments. It gets into the nitty-gritty details of your investment strategy, such as:

• Asset allocation — how much of each asset type you want to hold
• Risk tolerance — how much you can lose on paper in temporary downswings
• Liquidity requirements — how much cash, if any, you need to have accessible

7. Keep Saving Over Time to Smooth Your Returns

You never want to stop saving, even after your money is invested. The more you save, the more you can ultimately earn through compound interest. Saving also buttresses against risk and ensures that if a large unexpected expense arises, like a health event or natural disaster, you are prepared to handle it without deviating from your investment goals.

8. Learn Basic Investing Theories

Fear largely stems from the unknown. By learning the basics of investing, you’ll feel more confident and aware of what is going on with your investments. You’ll also be better equipped to make decisions and understand why there’s nothing to be afraid of when the market is fluctuating if you have done your homework and set up a strong, balanced portfolio.

9. Rebalance to Manage Your Portfolio Risk

Investing is not a “set it and forget it” proposition. The market changes, and rebalancing — maintaining the right mix of holdings in your portfolio — is essential to ensuring your portfolio remains diversified and within your risk parameters. Rebalancing is also an opportunity to exert some control over what your portfolio is doing and reassure yourself that everything is as it should be for your current circumstances. If you manage your own portfolio, rebalance it a few times a year. If you hire an investment manager, make sure rebalancing is part of the strategy.

Investing doesn’t need to be scary, overwhelming or confusing. Equip yourself with the knowledge, tools and strategies necessary to achieve your investment goals.

Source - gobankingrates.com

What You Should Not Do After a Stock Market Crash

A fall in stock market does offer some mouth watering opportunities for savvy investors. At the same time it frightens novice investors. In volatile times the emotions typically rule the actions of investors. Hence it is a must to be careful with one’s actions.

In the month of August 2015, stock markets around the world crashed and it virtually wiped out the gains of 2015 and a lot of investors may be feeling jittery regarding the future course of the markets. 

With so much volatility in global markets led by China, there is enough reason to believe that Indian markets will also get affected to some extent. It is during such volatile times, one needs to be careful and not take hasty decisions regarding their mutual fund investments. 

Warren Buffet famously said that “Be fearful when others are greedy and be greedy when others are fearful”. 

To put the quote in perspective, one should not take any knee jerk reactions and avoid the following. 

1.Shift your equity investments to debt: 

You will find many analysts as well as some of your friends/ acquaintances who will now advise you that there is more market fall coming and you should now come out of equity to avoid losses and move your money to debt funds to protect your capital. Instead of following their advice you need to ask yourself, why have you invested in equity funds? Is this money meant for long term goals which are at least 5-6 years away? Haven’t markets fallen like this before many times in the past and still managed to give inflation beating returns to those who stayed put? 

If the very reason for investing in equity funds is right, then you should not be moving your equity funds do debt now. 

2.Moving all your debt money to equity funds: 

Every investor needs to maintain a particular allocation to equity and debt, which is known as asset allocation. Debt provides safety when combined with an equity portfolio and prevents the overall erosion of capital in a portfolio. In case of any adverse emergency also you can safely withdraw from your debt funds and leave your equity funds to earn you better returns. If the market fall has reduced your equity allocation in your portfolio, then move your debt funds to equity to that extent to balance the portfolio. This will ensure that you are taking opportunity of the market fall and also rebalancing your portfolio which is essential to enhance overall returns in your portfolio. Don’t go overboard in considering yourself as different from the herd and commit all your debt money to equity. If the market volatility persists for some time and if you are in need of short term liquidity, you may have to sell from your equity funds as a loss. Always maintain a healthy debt -equity ratio as per your goals and risk profile. 

3.Let me sell my mutual funds and move to stocks: 

With such a huge market fall, many of the stocks would have definitely fallen more than the index. It will be tempting to invest in the stocks as most would perceive them to be now cheaper than earlier. How many of us have the knowledge and skill to decide if a particular stock is cheaper or expensive. There could be further downside in the index which might push those stocks even below the current levels. The very reason you are in mutual funds is to benefit from diversification and reduce your overall risk. By investing in stocks directly without any knowledge, instead of gaining you might lose big time, as speculation never pays. Some would also see the fall as an opportunity to make short term profit. 

In times such as these, it makes sense to control your emotions and believe that if the asset allocation is right and your selection of funds has been appropriate then it’s just a matter of time when the tide will turn and you will benefit from remaining invested. We all have a short memory and forget that in the past too there have been more sustained and greater falls but with every great fall the possibility of better returns have only improved with time . Just focus on the right process, the returns will follow. Your sensible action rather than reaction will decide the fate of your investments in the long run.

Source - moneycontrol