Dear Reader,
Volatile markets are a constant test of an investor's resilience and strategy. As the year draws to a close, it's essential to reevaluate your portfolio and ensure alignment with long-term financial goals. This article delves into actionable steps for navigating market turbulence, emphasizing the importance of a diversified asset allocation, including debt instruments as stabilizers. It advises caution against overexposure to momentum-driven plays and thematic funds, advocating instead for a core portfolio built on large, mid, and
small-cap companies. Portfolio rebalancing emerges as a critical exercise to mitigate risks and leverage market corrections strategically. Above all, adopting a long-term perspective is paramount. Equity investing rewards patience and persistence, even amid short-term fluctuations. With disciplined planning and informed adjustments, investors can transform uncertainty into opportunity, positioning themselves for sustainable growth in the years to come.
The message is clear: stay steady, stay strategic, and stay the course. Please do like, share & subscribe to our NSDL Social Media channels Twitter, LinkedIn, Instagram, Facebook & YouTube.
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Investing in Volatile Markets |
The end of the year serves as a crucial checkpoint for investors, prompting reflection on personal and financial milestones. This period is a crossroads for investors, particularly those navigating today’s unpredictable markets. Market volatility can feel like a test, shaking even the most confident strategies. But here’s the truth: turbulence is neither new nor inherently bad. It’s a reminder that markets are cyclical and that every investor must remain adaptable, from seasoned veterans to newcomers. The question
isn’t whether the markets will fluctuate—they will. The real question is, how should you respond?
Should you stick to your current plan or adjust as the year winds down? The answers lie in time-tested strategies that balance caution with calculated risks. This extended guide offers practical insights for realigning your portfolio and preparing for the long term, even amidst volatility. |
Embrace asset allocation and diversify with debt |
A well-balanced portfolio acts as a buffer against market unpredictability. The cornerstone of this strategy is disciplined asset allocation—spreading your investments across equities, debt, and other asset classes to manage risk effectively. For most investors, ensuring a portion of the portfolio is allocated to debt instruments is particularly crucial during volatile times.
Debt instruments, such as bonds or fixed-income funds, offer stability and liquidity. Unlike equities, which can experience sharp declines during market downturns, debt investments typically maintain modest but steady growth. They serve as a financial anchor, cushioning the impact of market swings and enabling reinvestment when equity valuations turn attractive. For instance, allocating 15–20% to debt instruments can help you weather equity market corrections without resorting to panic-driven decisions. This disciplined approach preserves your capital and positions you to seize
opportunities when market conditions improve.
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Beware of overexposure to momentum plays and thematic funds |
Recent years have witnessed dramatic rallies in momentum-driven stocks and thematic funds. The allure of these high-return opportunities is hard to resist, but they come with significant risks. Many investors who chased these ‘flavours of the season’ have suffered sharp losses, with some stocks declining by 40–60% when market conditions reversed.
It’s tempting to believe that these investments will rebound to their previous highs, but history suggests otherwise. Momentum and thematic plays are inherently speculative, often fuelled by trends rather than fundamentals. Treat them as seasoning for your portfolio—not the main dish.
Instead, focus on building a core portfolio centred on stability and growth. Diversify across large-cap, mid-cap, and small-cap stocks. These investments are less volatile and provide a foundation of steady returns over time. By anchoring your strategy in fundamentals, you reduce the risk of being blindsided by sudden market shifts. |
Volatility often skews portfolio allocations, pulling them away from your intended targets. For instance, a surge in equity markets may inflate your stock holdings, while a downturn could leave your debt allocation overrepresented. These shifts create an imbalance, increasing your exposure to unnecessary risks.
Rebalancing is the antidote. This process involves selling a portion of overperforming assets and reinvesting in underweighted areas to realign your portfolio with its original allocation. While this may feel counterintuitive—selling winners and buying laggards—it enforces discipline and positions you to capitalize on market corrections.
Rebalancing mitigates risk and fosters a proactive mindset. It transforms market turbulence into an opportunity, enabling you to take advantage of undervalued assets while trimming excess from overvalued ones. |
Invest with a long-term mindset |
Short-term market fluctuations often dominate headlines, fuelling anxiety and impulsive decisions. Yet, equity investing is fundamentally a long-term endeavour. It’s not about chasing overnight gains but about compounding wealth over years or even decades. Patience is a virtue in this journey, and it's important to remember that the market's trajectory is generally upward.
Historical data reinforces this principle. While markets experience periodic corrections, the overarching trajectory is upward. Investors who remain patient and consistent in their approach are often rewarded handsomely. Volatility, while unnerving, is part of the journey. It’s a test of resilience, separating those who react emotionally from those who act strategically. The potential for long-term gains is a reason for optimism in the face of market volatility. To succeed, adopt a long-term mindset. Set clear financial goals and align your investments accordingly. Avoid frequent trading based on market noise. Instead, focus on accumulating quality assets that are likely to appreciate over time. This approach not only minimizes stress but also maximizes your chances of achieving sustainable growth. |
Leverage market corrections wisely |
Market corrections, though unsettling, are opportunities in disguise. They offer a chance to acquire quality assets at discounted prices, provided you have the liquidity to invest. This underscores the importance of maintaining a portion of your portfolio in liquid assets, such as debt instruments or cash equivalents.
When markets decline, resist the urge to sell in panic. Instead, identify fundamentally strong stocks or mutual funds that are temporarily undervalued. Use this period to accumulate these assets, setting yourself up for long-term gains when the market rebounds.
However, tread cautiously. Not all discounted stocks are bargains. Conduct thorough research to ensure you’re investing in companies with solid fundamentals, competitive advantages, and strong growth prospects. This selective approach helps you avoid value traps and build a resilient portfolio. |
Stay informed, but avoid overreacting |
In today’s digital age, investors are bombarded with constant market news, analysis, and predictions. While staying informed is essential, avoiding overreacting to every headline is equally important. Emotional decisions often lead to costly mistakes, such as panic selling during downturns or overbuying during rallies. By staying informed and maintaining a level head, you can make more rational and beneficial decisions for your portfolio. Maintain a balanced perspective. Rely on credible sources of information and consult with financial advisors when in doubt. Focus on your long-term strategy rather than being swayed by short-term market events. Remember, the goal is not to time the market perfectly but to spend sufficient time in the market. |
Harness the power of SIPs |
Systematic Investment Plans (SIPs) are an excellent tool for navigating volatility. You benefit from rupee cost averaging by investing a fixed amount regularly, regardless of market conditions. This strategy involves buying more units when prices are low and fewer units when prices are high, reducing the overall cost of investment.
SIPs also instill discipline, encouraging you to invest consistently rather than attempting to predict market movements. Over time, this approach helps you build a diversified portfolio and achieve your financial goals with less stress. |
The role of professional advice |
In uncertain markets, seeking professional guidance can make a significant difference. SEBI registered Financial advisors bring expertise and objectivity, helping you navigate complex decisions. They can analyse your risk tolerance, recommend suitable investments, and ensure your portfolio remains aligned with your goals.
For investors who prefer a hands-on approach, tools like robo-advisors offer an alternative. These platforms use algorithms to create and manage portfolios based on your preferences. Whether you choose human or digital advice, leveraging expert insights to enhance your investment strategy is key. |
As the year draws to a close, it’s an ideal time to reassess your portfolio and make informed adjustments. Volatile markets, though challenging, also have growth opportunities. By adhering to principles like diversification, rebalancing, and long-term investing, you can navigate uncertainty with confidence.
Remember, investing is a marathon, not a sprint. Short-term fluctuations are inevitable, but they don’t define your financial journey. Your ability to remain disciplined, adapt to changing conditions, and stay focused on your goals matters. You can transform market turbulence into a stepping stone for lasting success with a thoughtful approach. So, take a moment to reflect, strategize, and position yourself for a prosperous financial future. |
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The article is written by Mr. Anand K Rathi, Co-Founder, MIRA Money |
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Key Information for Investors |
Investor Grievance Redressal Mechanism 1. SEBI Master Circular on the redressal of investor grievances through the SEBI Complaints Redress System (SCORES) platform dated November 7, 2022. Investors can access the master circular with the below link. SEBI | Master Circular on the redressal of investor grievances through the SEBI Complaints Redress System (SCORES) platform 2. We encourage investors to Read ‘Investor Charter’ at https://nsdl.co.in/publications/investor_charter.php
3. Online web-based complaints redressal system of NSDL can be accessed via link https://investor.nsdl.com/portal/en/home (Post your complaints/queries to NSDL) 4. Lodge your complaint with SEBI at https://scores.sebi.gov.in/ or SEBI Mobile App - SCORES SEBI Toll free helpline - 18002667575 / 1800227575 NSDL helpline - 022-48867000 NSDL email for grievance - relations@nsdl.com
NSDL email for other information - info@nsdl.com
Resolve your disputes in Securities Market online using SMART ODR Portal. Visit https://smartodr.in/login
5. SEBI Master Circular on Online Resolution of Disputes in the Indian Securities Market SEBI has issued Master Circular on Online Resolution of Disputes in the Indian Securities Market vide its Circular No. SEBI/HO/OIAE/OIAE_IAD-1/P/CIR/2023/145 dated July 31, 2023.
For more information, Investors may refer the SEBI Circular https://www.sebi.gov.in/legal/master-circulars/aug-2023/online-resolution-of-disputes-in-the-indian-securities-market_75220.html Visit SMART ODR website https://smartodr.in/login 6. SEBI Circular on Comprehensive guidelines for Investor Protection Fund and Investor Services Fund SEBI has issued revised Comprehensive guidelines for Investor Protection Fund and Investor Services Fund at Stock Exchanges and Depositories vide its Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/81 dated May 30, 2023.
For more information, Investors may refer the SEBI Circular in the following link: https://www.sebi.gov.in/legal/circulars/may-2023/comprehensive-guidelines-for-investor-protection-fund-and-investor-services-fund-at-stock-exchanges-and-depositories_71925.html 7. Claiming Unclaimed Shares and Dividends All dividends and shares which remain unpaid or unclaimed for seven consecutive years, are transferred by respective companies to Investor Education and Protection Fund Authority. Investors can submit claim to IEPF Authority to receive unpaid dividend and/or unclaimed shares by visiting https://www.iepf.gov.in 8. Facility to investors of voluntary freezing/de-freezing of Demat Accounts through Depository Participants (DP) or SPEED-e facility
If you wish to temporarily freeze/de-freeze your Demat Account for any reason, you can avail the facility of freezing your demat account by choosing Account level, ISIN level or Quantity level freeze anytime, anywhere by submitting a written request in the prescribed form to your Depository Participant (DP) or by subscribing to SPEED-e facility as e-Token User. You can freeze your account for 'Suspending for debit' or 'Suspending for debit and credit'. Freeze request executed by you through SPEED-e cannot be unfrozen by your DP. If your demat account
is 'Suspending for debit', no transactions are permitted in the demat account till the account is de-frozen. A frozen account can be de-frozen or re-activated on submission of written instruction by the demat account holder, in prescribed form to the DP or through NSDL's SPEED-e facility.
9. Awareness on careful preservation of Delivery Instruction Slip (DIS)
Beneficial Owners (BOs) should accept the Delivery Instruction Slip (DIS) from the Depository Participants (DPs) only if serial number is pre printed and Client ID is pre stamped or pre printed. BOs should keep the DIS in safe custody and should not to leave it “blank or signed” with the Depository Participants (DPs) or any other person/entity when not in use. 10. Online Closure of demat accounts
Online closure of demat accounts is made available for clients who have opened their accounts offline or online, by the DPs that provide various Depository related services in online mode. Those DPs which do not provide any services online and do not open accounts online may not be required to offer online closure of demat accounts.
11. Lodge complaints for Unsolicited Communication and fraudulent activities using telecom resources In case of Unsolicited Communication and fraudulent activities using telecom resources, you can lodge complaints as follows: -
In case of receiving spam or commercial communication make “DND” complaint at respective Telecom Service Provider’s App/Website, TRAI DND App, or Call/SMS to 1909
- In case of receiving suspected fraud communication, report the same to “Chakshu Platform” of DoT (https://sancharsaathi.gov.in/sfc/Home/sfc-complaint.jsp)
- In case fraud has already happened Report the same to Cyber Crime helpline number 1930 or website (https://www.cybercrime.gov.in)
12. Enhancement in the scope of optional T+0 rolling settlement cycle in addition to the existing T+1 settlement cycle in Equity Cash Markets
SEBI has vide its circular no. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/172 dated December 10, 2024 has introduced "Enhancement in the scope of optional T+0 rolling settlement cycle in addition to the existing T+1 settlement cycle in Equity Cash Markets."
For more information Investors may refer the SEBI Circular in the following link: https://www.sebi.gov.in/legal/circulars/dec-2024/enhancement-in-the-scope-of-optional-t-0-rolling-settlement-cycle-in-addition-to-the-existing-t-1-settlement-cycle-in-equity-cash-markets_89443.html
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NSDL Primer on Personal Finance - Your step-by-step guide to wealth creation |
Discover the essential tools to take control of your financial future with NSDL’s Primer on Personal Finance book. The book has been crafted with essentials of personal finance and comprise topics such as The Need for Savings, Wealth Creation, Asset Allocation, Insurance Fundas, Prepare for Retirement, Handing Over Your Legacy, How to Start Investing and How to Build and Monitor a Portfolio. So why wait? Start your journey to financial independence today!
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NSDL conducts Investor Awareness Programs (IAPs) to help investors to be aware of different aspects of investing. These programs are conducted on different topics of interest to investors and in different languages. The schedule of the forthcoming programs/webinars is published online at https://nsdl.co.in/Investor-Awareness-Programmes.php. We invite you to participate in these programs. We shall be happy to conduct an awareness program for your employees, staff, students, or members. Please write to us at info@nsdl.com if you want any such program to be conducted.
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Published by Mr. Yash Gyanani (Editor) on behalf of National Securities Depository Limited Investor Education Fund Trust. |
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