What Should Mutual Fund Investors Do When Market Senses Correction?

The major stock market indices are looking a bit shaky near their all-time highs.

- Sanjiv Puri

The mid-caps and small cap stocks had run a lot in the previous year and some shakeout was seen in the market. For a long term investor, such volatility should not be a matter of concern. There will be periods of ups and down, but over the long term the equities, as an asset class, has shown to drift upwards. Economies witness several changes over time and are even interlinked to the dynamics of other countries. Markets, therefore, react to every such impactful event that occurs in countries to which they are linked.

As a mutual funds investor there are few things that one can do.

Do not listen to predictions

It’s absolutely impossible for anyone to predict the movement of markets. Period. Stay away from predictors at all costs. Factors affecting market movements have increasingly become more complex, interrelated and dependent on global events as well. Further, there are technical factors at play. When technical support levels are broken by market, the next level gets projected as the support. But then, market moves are highly irrational, and all the support-levels can be broken because markets are meant to be unpredictable.