1. WATCHING FROM THE SIDELINES MAY COST YOU
When markets become volatile, a lot of people try to guess when it will bottom out. In the meantime, they often park their investments in assured return products. Unfortunately, many investors are slow to recognize a retreating market, and many others fail to see an upward trend until after they have missed opportunities for gains. Missing out on these opportunities can take a big bite out of your returns. The chart below depicts the risk of trying to time the market. By missing just a few of the market’s best single - day advances, you could put a real crimp in your potential returns.

2. SIP MAKES IT EASIER TO COPE WITH VOLATILITY
Most people are quick to agree that volatile markets may present buying opportunities for investors with a long-term horizon. But mustering the discipline to make purchases during a volatile market can be difficult. You can’t help wondering, “Is this really the right time to buy?”

Systematic Investment Plan (SIP) is an optimal route which can help reduce the anxiety about the investment process. Use online SIP Calculator to calculate returns on your investment. Simply put, SIP commits a fixed amount of money at regular intervals to an investment. You buy more units when prices are low and fewer units when prices are high, and over time, your average cost per unit may be far less than the current price per unit (see table below). This is known as Rupee Cost Averaging (RCA) and involves a continuous, disciplined investment in fund units, regardless of fluctuating price levels. While you may not see the benefits in the short term, continuing SIPs over longer time frames and across market cycles helps in the objective of wealth creation.

The below graph indicates that a 20-year SIP in the S&P BSE Sensex is able to buy units at an average cost of Rs.9,215 compared to the Sensex value of 40,129 as of 31 October 2019. This means that the investor gains 40,219 - 9,215 = 31,004 per unit mainly due to the longer holding period and RCA.

3. TUNE OUT THE NOISE AND GAIN A LONGER-TERM PERSPECTIVE
Numerous television stations, business newspapers, websites and social media channels are dedicated to reporting investment news 24 hours a day, seven days a week. What’s more, there are almost too many financial publications to count. While the media provides a valuable service, they typically offer a very short-term outlook.

It is historically proven that market fluctuations and volatility is generally transient in nature with a probability of getting ironed out in the long run.

Below is an illustration depicting the daily rolling returns of the Nifty 500 Index (as on October 31, 2019) across 3,5 and 10 year intervals seen over a period of 10 years. We observe that over longer tenures, there are no instances of negative returns.

4. NOW MAY BE A GREAT TIME FOR A PORTFOLIO CHECK UP
Is your portfolio as diversified as you think it is? Your portfolio’s weightings in different asset classes may shift over time as one investment performs better or worse than another.

Historically, it has been observed that no particular asset class has consistently delivered the best relative returns. (see table - Winners Rotate) Hence, do not put all your eggs into one basket. But instead, benefit from the power of diversification.

5. BELIEVE YOUR BELIEFS AND DOUBT YOUR DOUBTS
There are no real secrets to managing volatility. Most investors already know that the best way to navigate a choppy market is to have a good long-term plan and a well - diversified portfolio. But sticking to these fundamental beliefs is sometimes easier said than done. When put to the test, you sometimes begin doubting your beliefs and believing your doubts, which can lead to short-term moves that divert you from your long-term goals. This behavior from a majority of investors is the key reason why investor returns are always lower than investment returns. It is therefore advisable to stay invested over longer tenures from a wealth creation perspective.

Disclaimer: Information contained in this literature is not a complete representation of every material fact and is for informational purposes only. Regulatory/ taxation details mentioned in the literature are provided on a best effort basis and are as per the existing laws and subject to change from time to time. The recipient is advised to consult his/her advisor/ tax consultant prior to arriving at any investment decision.