Topic 1: Tips for equity mutual fund investors when economy is impacted owing to Covid-19 pandemic

The impact of coronavirus pandemic on the economy could have long-term consequences. While the immediate ramifications are already being felt across the economic strata, the footprints of the pandemic may very well remain for years to come. It remains to be seen how resilient our economy is and how fast the recovery happens across the sectors.

A country’s economic situation is a cyclical outcome; however, resilience is what helps economies bounce back faster than expected. The resilience of a country is likely to be higher if some of the following factors are present:

There are some investment rules or tips that should be followed:

• A bad investment in a bad economic situation is a dangerous combination and can be avoided by periodically getting your portfolio reviewed, irrespective of the economic situation.
• An asset allocation review should be done regularly. It is important to correct over allocation or under allocation. Depending on your case, your portfolio may require rebalancing and selling of excess units.
• Once your mutual fund portfolio has been reviewed and streamlined, it is necessary that you hold on to your investments, even if the economy is deteriorating. On the contrary, your portfolio should be rebalanced with other asset class positions and/ or averaged out with fresh funds.

A great benefit of staying invested in good mutual funds is that the market will also identify these funds and ensure that there is sufficient cash flow to the fund manager to average out the price of the holdings. Therefore, in times of market correction, it is better to stay invested even if one does not invest fresh cash.