Regret that you didn’t buy back the investments during the market peak? This is how much you could have saved
Markets have provided extraordinary returns since the March 2020 low. Over the past 18 months, BSE Sensex has gone from 25,981 to 60,000 in September. A direct gain of 134%. However, due to the recent fall, many investors regret not having redeemed their investment during the market peak.
But is it really worth regretting?
Riding the high market, many investors have achieved excellent returns by investing in the lows while buying out during the highs. But, they would have gotten much higher returns if they had stuck with their investments.
Two of the biggest winners of this summit were the Quant Small Cap Fund and the Kotak Small Cap Fund.
When the Sensex was at 25,981 on March 27, 2020, the NAVs of the Quant Small Cap and Kotak Small Cap funds were ??30.15, ??50.07 respectively.
Now that the Sensex hit 40,509 on October 9, 2020, the NAV for Quant Small Cap was ??62.05 and for the Kotak Small Cap fund, it was ??88.23. So for an investment of ??1 lakh on each of the funds on March 27, 2020, the investor would have earned a total corpus of ??2.05 lakh and ??1.76 lakh.
Likewise, when Sensex reached 50,731 on February 5, 2021, the net asset value of Quant Small Cap was ??76.35 and the Kotak Small Cap fund was at ??119.82. The same investments have become ??2.53 lakh and ??2.39 lakh respectively.
And, on September 24, 2021, as the Sensex reached 60,048, the corpus of each of the investments rose to ??4.38 lakh and ??3.55 lakh respectively with the net asset value of Quant Small Cap reaching ??132.26 and the net asset value of the Kotak Small Cap fund affecting ??177.94.
Here’s how much you could lose:
- So if the investor had redeemed the investments when Sensex reached 40,000, he would have suffered a loss of ??2.33 lakh on the investment of Quant Small Cap and ??1.79 lakh on the Kotak Small Cap fund investment (compared to when Sensex reached 60,048 in September 2021).
- Likewise, the investor would have suffered a loss of ??1.85 lakh and ??1.16 lakh respectively, if he / she had redeemed the investment when Sensex reached 50K (compared to the corpus in September 2021)
“Markets are rarely high when you visualize them today, compared to the future, say 10 years later. We invest for future market levels. The nature of the market (especially in a developing country like India) is to increase with some temporary declines in between, ”said Kalpen Parekh, Managing Director and CEO of DSP Mutual Fund.
In addition to this, Arijit Sen, SEBI registered investment advisor and co-founder of merrymind.in, said that when an investor is considering buying back their investments, they should ask themselves a few questions: Why should they sell them? And then, after selling it, what does he want to do with it? Where does he want to park the money? etc.
Redeeming at random based on market movements, it makes investment active passive. Also, in turn, it lacks the impact of capitalization on long-term investments, he added.
When to buy back your investments:
As you approach your investment goals: Whenever you invest, you must have an appropriate goal. And based on that goal, you will automatically determine how much money you need when you need it.
For example, if your goal is 15 years, then you should think about changing your investment strategy from the 10th or 11th year. And you shouldn’t worry about short-term market corrections.
When the financial goal changes: This is not the right approach to chasing returns; the investment must be made according to its financial objective. When your goals change, it becomes necessary to change your investment strategy and therefore it may be necessary to buy back investments.
When the markets tend to go up, people forget the importance of asset allocation. And when there is no asset allocation, investors try their luck by making such random investments, Sen concluded adding, but the same can turn deadly when the market starts to turn in. the other way.
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