CEO Speak October 2024

The Long Game

We have witnessed global events like geopolitical uncertainties, elections, trade tensions, pandemic - affect markets across the globe in the recent past. These kinds of uncertainties remain to be a part of the global landscape, while our collective hope is peace and stability. It is natural for many investors to worry during such times of volatility but one must also be cognizant of the fact that now they have several historical data points to refer to when the markets have bounced back after a trough and rewarded investors who remained patient and did not exit during a sudden downturn. We must also keep in mind that our domestic economy has also shown remarkable resilience through several challenging times. Most of our domestic macro-economic indicators continue to be on track of growth.

Here are 3 points that explains why investing in equity and through mutual funds is a Long Game - that is staying invested for a long term.

1. Volatility is temporary, but your goals are long term
   When your financial goals are saving for retirement or children’s education, your investment time horizon is often meant to be for years and even decades in the future. Hence reacting to short term volatility and panic withdrawals will only hamper your goal of wealth creation in the long term. History has shown that markets recover and often exceed previous highs over time. This makes staying invested crucial for achieving long-term financial goals, rather than focusing on short-term market dips.
2. Diversification – helps in long term
   By maintaining a diversified portfolio, investors can reduce the impact of volatility and mitigate risk. Balanced funds, Large cap equity funds, flexi funds , mid cap, small cap and other asset classes are all meant to function on different investment and fund management objectives. Regular review of your portfolio and realignment as per your risk appetite towards a diversified portfolio helps investors in long term returns.
3. Power of SIPs – for long term wealth creation
   The beauty of SIPs lies in the concept of rupee-cost averaging—when markets are down, investors buy more units for the same amount of money, and when markets rise, the value of the accumulated units increases.

By continuing SIPs during periods of market volatility, investors can potentially average out the cost of their investments and benefit from long-term growth. SIPs eliminate the need for timing the market and takes advantage of the ‘time spent in the market” that helps you in your long term wealth creation. Whether the market is up or down, sticking to your SIP ensures disciplined investing.

In the face of market volatility, the best course sometimes is to do nothing at all. Stay invested, continue with your SIPs and do not get into any investment decisions that is driven by emotions or panic. Trusting the resilience in the markets to recover.

As we turn our page into the festive season, patience, discipline, and a commitment to long-term investing principles will be your greatest allies in the journey of wealth creation.

Happy Festivities!

Source: HSBC Mutual Fund, Data as on 30 Sep 2024.

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Note: Views provided above are based on information in public domain and subject to change. Investors are requested to consult their financial advisor for any investment decisions.

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