SHOULD I invest in these fluctuating markets?” is the question gnawing at the minds of investors. The market was weak two weeks ago; this week however, the markets are looking up. Not just that, 1 to 2 per cent change in the markets per day has become common place. So, what should you do - invest or exit? Let’s first understand the impact of the fluctuations before we get to solutions.

Market fluctuations
To fluctuate is one of the basic characteristics of the stock market. However, any 5-year chart of the index (Sensex or Nifty) shows that there is always a significant gain. The same is true even for the 5 years ending December 2008, when the market fell almost 50 per cent during the year. But every market fluctuation has implications:

- Markets have gained, but your investments are still negative
If you had invested your funds at the peak of the market and stayed there, the funds would not have still recovered from the losses that they suffered in 2008. So, should you wait or exit?

Perspective: Loss or gain in the stock markets is only on paper till the shares are sold. So, the investment that has a lower value today has not lost its true value, unless one sells it. All that it needs is time to give a better value.

Read: Sensex 17k - What should investors do?

- You had planned to withdraw from market, but it is still low
You goal could have been your daughter’s marriage, retirement, a housing down payment. The time set for these goals has neared, but there has been a fall in the market at the time of withdrawal.
So, do you extend the time frame, and can you do that?

Perspective: We could find the right time to invest in the market only retrospectively. No one could guess to what extent the market would react to certain economical news. If you have invested for your retirement or your child’s marriage, you could withdraw over a period of 6 months before the marriage or the date of retirement. This will not only help you in the run up to the event but also prevent losses from any sudden fall in the market.

- You have got a one-time lump sum of money
An unexpected bonus or an arrear due for two years may suddenly come into your hands.
So when do you invest this money in the market?

Perspective: You can overcome problems related to fluctuations in the market by investing at a higher frequency, and staying for a longer period. This requires planning earlier and investing at least for a period of 5 years. This will take care of the market ups and downs during the investment period.

Final word: Fluctuations are a basic nature of the stock market. You cannot wish it away, nor should you avoid the stock market because of the fluctuations.

Also read: Market crash - tips to cut losses

Illustration: Vaibhav Shirke



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