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Friday, December 19, 2008

TREAT MFs AS LONG TERM INVESTMENTS, HANG ON

TREAT MFs AS LONG TERM INVESTMENTS, HANG ON

With the current global recession, there are two aspects to the panic regarding mutual fund investments. One, it depends on what type of funds you have. Retail investors as well as those who have invested in fixed maturity schemes are not severely affected in the equity market. The other concern is whether the investment is equity-oriented. There is an equity-oriented plunge in the value of funds mainly because the markets are crashing. The question is that what do people do with their investments? In a way they are the means of building and adding to your wealth, and also adding to your holdings. So if investors are looking at building wealth and adding to their investments then they need to be patient.

Many investors today are selling off their mutual funds because they are in a state of panic. Ideally mutual funds should be treated as long-term investments, not for six months, but with a 3-7 year perspective. So a fall in the market should not be the reason for people to sell units. Many investors find it difficult to control their emotions and hence go for knee-jerk reactions. Sometimes the reason for this is also peer pressure, and media speculations about the global crisis. Unless you desperately need the money, I would say hang on and don't sell your units at a loss. A smart investor should stay invested.

Source: DNA
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