Russia-Ukraine crisis sinks equity markets by nearly 2,000 points.

Follow these five steps to insulate your investments


The Russia-Ukraine crisis will make equity markets highly volatile. But investors should not worry and instead take advantage of the current volatility by investing in equity mutual funds in a staggered manner


The Russia-Ukraine war appears to be going ahead as Russian president Vladimir Putin announced a military operation in Ukraine and several explosions were heard. Closer home, the S&P BSE Sensex has fallen by nearly 1,800 earlier in the morning. As it is, markets had turned volatile since last October after nearly 18 months of a solid market rally. The corrections have been stiffer over the past few weeks. The S&P BSE Sensex has been hovering around 55,000 levels in early morning trades on Thursday.

As an investor, you would be anxious to insulate your portfolio during the decline.

Here are some ways to protect your investments during stiff corrections.

Do not stop your SIPs

Whatever you do, do not stop your systematic investment plans (SIP) when equity markets turn volatile. A study done by IDFC Mutual Fund showed that if investors had continued their SIPs- despite the initial Covid-19 market crash that happened in March 2020 and continued for a period of two or three years, they would have benefited more as opposed to those who withdrew in panic, prematurely.

Joseph Thomas, Head of Research, Emkay Wealth says, “Be it the Ukraine-Russia tussle or the rising crude oil prices, they are here for short term.” Investors should take advantage of the current volatility by investing in equity mutual funds in a staggered manner, he adds.

A fund manager who did not wish to be quoted for this story warns: “A 2-3 percent fall should not nudge you to stop your SIPs. We will see a few more days of bigger dips in CY2022. Be mentally prepared. And continue SIPs.

Invest, but do not speculate

Many investors buy stocks on their own. Some have also taken to trading in derivatives. The leverage involved amplifies any negative outcome and especially on a gap-down day such as on Monday if you carry an overnight long position. There is little to be done if you have not hedged it. Large losses can wipe your savings clean.

Vaibhav Porwal, Co-Founder, dezerv – a wealth management firm says, “Investors should compare the performance of their overall direct equity portfolios with appropriate benchmarks and do not rely on individual stocks that have done well.” He advises against getting into penny stocks or micro-cap stocks just because they did well in the past.

Buying a stock after understanding the risk reward associated with the underlying business is a good start and accumulating them over a period of time can be rewarding. However, buying stocks on tips with a hope to make quick buck can be counter-productive. Vijai Mantri, co-founder and Chief Investment Strategist, JRL Money says, “Avoid investing in direct stocks or over-hyped initial public offers. The market leadership is changing and what has worked earlier may not work in future. Do not buy a stock at any price only because the company promised growth and quality in the past.”

Examine thematic investing

Over the last two years, many thematic funds were launched and investors too latched up to many of them expecting superior returns. Most come with high risks, not worth taking. But there are a few opportunities, market experts say. Mantri likes thematic mutual funds such as PSU equity funds, financials and infrastructure. Do not put more than 10 percent of your overall portfolio in theme-based investments, he adds.

Porwal disagrees, somewhat. “Thematic funds tend to do well when the themes are near their peaks. Most investors are better off avoiding thematic funds.” A good way to decide if thematic funds are good for you or not is to see your existing portfolio before you whip out your cheque book. If you are just beginning out your equity journey, then void thematic funds. These cannot be among your first few investments. Opt for thematic funds only if you are sufficiently diversified and you can take the volatility risk that can come with thematic funds.

Stay diversified

Investing on a volatile day can offer you a head-start as you may be buying stocks cheaper than what they were a day before. But that does not rule out the possibility that the stocks won’t go down further. You may want to buy units of exchange traded funds (ETF) that track leading indices such as Nifty 50 or Nifty Next50 to take advantage of intra-day volatility.

Mantri advises most retail investors to stick to flexicap funds or multi-cap funds. Thomas advises small allocation to ETF. “However, actively managed funds should form a large component of your equity portfolio, especially in volatile times, as fund managers can offer better returns compared to their benchmarks,” he adds.

Diversified equity funds allow the fund managers to align their portfolios with changing business fundamentals and valuations. Joseph further advises investing in balanced advantage schemes. “The volatility is not going to go away soon and the equity markets may drift lower for some time. New investors or investors with moderate risk profile should consider investments through balanced advantage funds as they tend to contain downside to a certain extent.”

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