Short term market volatility, may seem scary at first but offers a great opportunity for long term investors to top up their portfolios and buy more units at a better price. If you’re redeeming from your investments because of short term market volatility, we urge you to rethink. Here are the top 3 reasons why you should not redeem your investments:
Here are the Top 3 Reasons Why You should not redeem your Investments:
- Market Volatility – If for instance the SENSEX loses 1,000 or more points in a day, it is bound to affect the equity in the portfolio. Manic markets often persuade the investors to redeem. One needs to realize that market correction is a temporary phase and will soon pass out. Markets are akin to cardiogram or life; has its ups and downs, but with time springs back. If one closely analyses the market trends, there has been an ascending movement of the market over a long term.
- Sudden rise in investment value – If the investment in the Portfolio has risen suddenly over a short period of time which might tempt oneself to redeem and make a quick buck. Eventually that might lead to losing on the potential of long term wealth creation from power of compounding.
- The Bull Bear Cycle – A common practice amongst investors is that if they have invested in a bull market, they assume the situation to remain the same throughout, not thinking much about the bear market. Since market movements are cyclic, investors should have a realistic plan in mind while investing and be prepared for all kinds of market movements. This is precisely why investors are often suggested to not put all their eggs in one basket and follow disciplined asset allocation approach for risk efficient portfolio return experience.
Conclusion
Finally, investments are made with the objective of achieving certain personal goals in mind, unnecessarily interruptions in investment portfolio may make the task of achieving those personals goals much harder. Focus on investment goals instead on short term considerations.
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