As the markets are presently down and lacks strength to move up, are you worried about the notional losses on your investments in mutual funds?
If yes, it means that you have allocated more percentage of your savings to this category of investments. Mutual Fund is an asset which will have big swings in its value. And such volatility is what gives the high returns. When there is up & down movement, it will ideally have negative returns on the investment which will be temporary.
Still why investors are worried?
- Worry comes because of insecurity.
- Not being secure is due to the fear of losing.
- Fear is more when losses are going to be higher.
- It is higher because all or major part of all your savings is at stake.
Instead, if you had a lesser percentage of the total of your investment and you are aware that the volatile nature and the resultant profits at a later stage. It will not be a worry.
So, what should be the ideal percentage of exposure to Mutual Fund investments?
Though mutual funds gives the best of returns when compared to all other asset classes. It requires patience and commitment to stay invested. Level of patience depends on the understanding one has on the assets ability to deliver.
For a person who is new to Mutual Funds and for those who are conservative, having 25% of the total investible assets in mutual funds is ideal. The rest can be invested into real estate of safer assets life FD’s & Gold
If you have knowledge of the swings in the market, you know that when market goes down, it will eventually come up. Yet, don’t invest all your savings into Mutual Funds, go only up to 50% and keep the rest in other assets
Ideally, having a mix of all asset classes for investments is a good option. Only if you put all your eggs in one basket, there is insecurity and worry, when it is diversified and we know the long term outcome. Short term moves will not put us in anxiety.