Investors must not get frightened and cash in their investments in a hurry in the present market scenario, since it will convert their speculative losses into real ones. This is the message mutual fund distributors should communicate to their long-term clients. Tell them that their funds are in expert hands and they should not take the wrong decision of redemption.
Moreover, investors need to be aware of their risk appetite and adhere to the asset allocation strategy set earlier. Simply because the Sensex has fallen considerably and several stocks seem to be attractive, one should not modify the plan. For example, a cautious client suddenly should not start investing like a client who has a high risk taking ability.
Mutual fund distributors should also explain to clients that they must not keep a tab on their returns on a daily basis and get worried during the current market volatility. Constantly checking their portfolios can cause unnecessary anxiety. When investors choose long-term investments keeping their objectives in mind, they should look at their gains only when the timeline for attaining these goals comes close.
One must keep in mind that SIPs in mutual funds are more stable in the long run as compared to investing money via the lump sum method. After investing in SIPs, if your clients have some extra funds, it should be put in the emergency fund. Having an emergency corpus to look after 6-8 months of expenses is critical in such uncertain periods.
Owing to Covid-19 outbreak and the present lockdown, mutual fund distributors might not be able to meet their clients in person. But they can employ other modes of communication such as e-mail, phone or video calls and reassure clients that they are always there for any guidance especially when the markets are also going through turmoil.