AN INVESTOR EDUCATION INITIATIVE BY
Insights Nov-Dec 2016
Volatility: Can be a boon more than a bane Pg 02
Style based Investing Pg 03
Rupee Cost Averaging: Buy low, sell high!
Volatility Can be a boon more than a bane
4 Things You Need To Consider Redeeming Your Mutual Fund Investments Pg 05
Optimize Your Investment Pg 06-07
The only 3 calculations you need to know Pg 08
Are You Ready To Test Yourself? Pg 09
The Christmas Present Pg 10
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Volatility: Can be a boon more than a bane An opportunity for investors to tap into equity markets.
Mr. Nimesh Shah, MD & CEO, ICICI Prudential AMC
olatility is a given when it comes to financial markets. Whenever there is a policy shift or periods of change in any economy, financial markets tend to go through periods of heightened volatility. This is generally because financial markets comprises of different stakeholders like long and short-term investors, financial institutions, pension funds, and many others, who participate with varying financial goals and objectives which ultimately leads to volatility. However, all is not grim as it sounds. Volatility in simple words is a movement of stock prices on a daily, monthly or a yearly basis put against its historical averages and valuations. The prices can move on the higher or the lower side of its historical averages based on various factors. Such volatility gives investors an opportunity to buy and sell into the markets at a relatively cheaper price and this is one opportunity an investor should tap into. Taking into account the current economic scenario, it is recommended for investors to invest in high quality assets that are on the decline, which can benefit from market during the period likely between 2017 and 2019. This volatility in the Indian market is a logical one, considering the recent developments in the Indian economy and financial market. Reserve Bank of India's neutral credit policy, strengthening of US Dollar, demonetisation of currency notes were all some of the reasons which lead to volatility in the Indian stock market. Due to these reasons, the Indian equity markets came under pressure thus making a suitable time for investors to enter the market and gain from the volatile times. With the Indian economy poised to grow at a faster rate in the coming few years, and other big economies like China and the Euro zone struggling, India continues to remain poised as an investment destination. Regardless of the nature of volatility in the market, to generate returns it's recommended to invest in equity for a long term. Investment-wise, equity valuations are also relatively attractive that what they were a few months before. It can be challenging for an investor to actually invest with fear and risk of markets falling further also at play. However, if continuous and regular investments are made following a strict discipline of allocating assets, investors need not worry about further volatility in the market.
investors to opt in for a balanced fund, a classical asset allocation strategy that invests in equity and debt in a more or less static proportion. The re-balancing takes place depending on market conditions but the allocation of equities ranges between 65-100%. Within balanced funds, we also have funds with a dynamic asset allocation strategy that follows the principle of rebalancing periodically and regularly. If equity prices decline, the scheme adds more equity, and vice versa. These funds aim to increase or reduce equity investments in the range of 30-80%, depending on market situation using a valuation yardst