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Don’t fret over fall

Not rising interest rates, not corruption, not policy freeze. When the Sensex crashed 702 points during the day, the only reason being ascribed was uncertainty about the US growth rate that would compress the world economy, including India’s. HT explains.

business Updated: Aug 06, 2011 02:13 IST
HT Correspondent

Not rising interest rates, not corruption, not policy freeze. When the Sensex crashed 702 points during the day, the only reason being ascribed was uncertainty about the US growth rate that would compress the world economy, including India’s. As TV channels multiplied the panic that had set in among the broking community the Twitterati and common folks trembled.

If you are constantly stuck to the stock ticker, watching where the market is ‘now’, you are probably not doing what you’re supposed to — your day job. Besides, the market itself has evolved into a very complex beast with action in one part of the world disrupting businesses in an apparently unrelated part. With the best minds serving the markets and information that changes every nano-second, the scale has become steeply tilted against small investors. So, here are the three rules that small investors need to follow today — and every day.

Rule 1: Ignore the market

Neither the salary that finances your EMI nor the performance that ensures you get a raise is decided by the market. At best, it is one of the vehicles of investment — powerful, but not enough to hold a buy-sell gun against your head. The only people who make money when you trade is the broker through his commission. Markets move up and down —that is the dharma of the markets.

Rule 2: Make, and follow, your financial plan

A financial plan takes into account your income, your needs and your future money aspirations and builds a road to http://www.hindustantimes.com/Images/HTEditImages/Images/06_08_11-buss25.jpggetting there. In this plan, your investment is only one part of the picture, the others being setting financial goals, insurance, retirement, estate planning and so on. Investments is just one part of a financial plan. Contact a good financial planner and make your plan. If you already have a plan, just follow it.

Rule 3: Continue with your SIPs

“Investors should continue their investments in systematic investment plans (SIPs),” said Ranjeet Mudholkar, vice-chairman and CEO, Financial Planning Standards Board India. “An investor’s equity exposure in any case should not exceed the pre-determined percentage of the total portfolio as per his or her financial plan as established by his Certified Financial Planner.” An SIP allows you to invest money in a mutual fund every month, irrespective of where the market is. “Retail Investors must continue to remain invested through SIPs,” said Anup Bagchi, managing director, ICICI Direct.

Rule 4: Don’t worry

Even if it slows down, India’s economic growth will be among the world’s fastest. And however hard you try, you can’t keep money away from growth.