Why Mutual Fund Investors Should Not Panic From the Current Volatility?

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Volatility has been a part of the equity market from quite some time now. Multiple reasons were there that have been taking the mutual fund investments on a roller coaster ride. From the past few days, ups and downs are again been observed in the market, because of which a drop is being observed in the equity mutual fund schemes as well.

Now, panic is obvious after volatility, and the same can be seen among the mutual fund investors right now. So, today, in this blog first you will read about the reason for this volatility in the market and after that, it will be discussed that why you should not panic from this volatility.

US-China Trade Conflicts

After a cooldown of a few months the trade war between the US and China, the two biggest economies of the world has again resumed. Recently the United States has increased the tariffs on $200 billion worth of goods from 10% to 25% and is planning to increase the tariffs on $ 300 billion more of imports. In retaliation, China has also increased tariffs on US $60 billion worth of imports from the US. This has given rise to negative sentiments in the market because of which volatility is being noticed.

Awaited Election Results

The awaited Lok Sabha election results, and the uncertainty about which party will win with what number of seats is also a major factor behind the current volatility. This volatility can continue for the upcoming sessions as well, and the effect of that can be seen on the NAVs of mutual funds as well.

Rising Oil Prices

After the US has ended the waivers on the sanctions regarding the purchase of oil from Iran, the oil prices have shown a considerable rise. The cost per barrel has increased to $75 and looking at the current conditions further increase can be observed. As India was among the major importers from Iran, the effect of the rise was huge. If the oil prices keep rising, further volatility can be observed.

Quarterly Results

Recently Q4 results of a lot of companies have been announced which also affected the performance of different indices. After the results, a lot of downgrades were seen in the ratings, which led to a sell-off, causing volatility in the market. Most of the companies that have posted their results have either shown expected results or have provided a lower performance than expected. This is also a major reason behind the soaring of equity indices.

Why You Should Not Panic From This Volatility?

Volatility is a part of the equity market and over the years there have been several instances when ups and downs have been observed in the market. In fact, volatility is one of the factors that help the mutual fund schemes to generate such great returns in the long term. Now, one way to deal with the volatility is to show unnecessary panic, and the other would be to take the benefit of this opportunity. The factors you have seen above have surely hit your returns, but it is expected to be just short term volatility. In the long term, there will be no negative effect of this volatility on your returns. Also, by continuing your investments now, the units of your selected mutual funds can be accumulated at lower NAVs, which will help greatly in boosting the returns when the market shows upside again.

Hope, now you got the idea that why you should not panic from the current volatility. So, take advantage of this volatility and keep accumulating the mutual fund units. In case you see a huge drop in the NAV of your scheme, you can also consider making an additional purchase to further elevate your growth. At last, just remember that in the future too, market can show volatility. So, be ready to enjoy the ups and show courage during the downs.