Mutual Fund Investment strategy when market is at all time high

The BSE Sensex reached the new milestone, the 60,000 last week. It is natural that investors are excited because the stock exchange continues to rally amid uncertainties from the USA and the Chinese market. The rally was seen not only within the bluechip segment but across broader markets. Nifty Smallcap, Nifty Midcap advanced from their last closing values.

Some analysts are noting that the last 10,000 points were crossed during a record time by the Indian stock exchange. The NSE Nifty was nearing its own landmark of 18,000 points. Market Gurus suggests that it's because decreasing concerns of a possible third wave of the Covid-19 pandemic and increased pace of vaccination have contributed to the gains within the markets. Every investor mostly the mutual fund investor is thinking about his ideal strategy during this market condition.

Sensex at 60000 benchmark is simply an another number. Existing and new investors shouldn't overwhelmed by index levels but should check out valuations of portfolios, stocks & Mutual Funds one has invested or plans to take a position. If the economic recovery is in the process we believe there might be a possible rise in corporate earnings. The investor should review their portfolio for the allocation with respect to future financial goals, rebalance it if required, and stay invested.

Whenever the market touches such milestones, we've seen tons of new investors start investing and lots of existing ones want to form changes to their portfolios. However, investment advisors believe that milestones in the market should not decide an investor's investment strategy.

We should not get too excited by these milestones. The milestones in an investor’s personal financial journey is more important and that’s what they look for. 

Investors should continue with their investments as per their financial plan. If required, the investor can do tactical rebalancing & transfer some of the investment from equity to debt asset class. If there's a need to top-up within the emergency corpus, make sure that it's filled. More important, Don't assume that this market would always continue. Don't change your return expectations to a better value. This will impact your financial goals.

Another important point is that investors tend to invest in new funds when the markets are scaling new highs. Investors should know the types and the number of funds in their portfolio. They should invest only in schemes that have proven their record in several market phases.

According to advisors, there is no right time to start a mutual fund SIP (systematic investment plan), but there is certainly a right time when one can book profit in one's portfolio. The most perfect time for booking profit in a mutual fund portfolio is when you are near to achieve your financial goal. However, there are some other times when an investor should look for booking profit in a mutual fund portfolio. Such moments are financial emergencies or portfolio balancing.

The investor can reduce his riskier mid and small-cap exposure while rebalancing. This is often also the right time to sell some funds if your portfolio contains a lot of schemes in it. 

When we think about booking profit in mutual funds, it can be seen differently compared to direct equities. The mutual funds are managed by fund managers and they are in a better position to take a call on profit-booking based on their expertise and view. Hence, mutual fund investors can rely on the fund managers to make the best call. However, looking at the current market levels, investors of mid-cap and small-cap funds can consider booking some profits as these indices have increased a lot from the past year.

Corrections in the market cannot be ruled out in the equity market but then as seen in the past, the equities tend to drift upwards over the long term. As people say in the market, there’s no such time as the best time to invest. Trying to time the market is not a good idea in any scenario. The money should stay more time in the market is what matters. The longer the investor keeps his money invested, the better is the potential to generate a high risk-adjusted return and is also able to beat inflation in the long term. Investor should always try to avoid common investment mistakes.

The new investors who want to enter the Stock market by seeing the Sensex can start with SIP in Mutual funds. This will help them minimize the risk of studying value stocks. Investing in Mutual funds systematically instead of lumpsum will help them avoid buying everything at a higher price. Rupee cost averaging will play its role in the long term.