Why is the Stock Market Going Down, Stocks Vs Mutual Funds – #AskGroww (Part1) | Groww


Through this session we want to answer your questions We had sent a survey few days ago in which you all asked us a lot of questions An interesting thing for you, we are not sitting together and making this video, we are in our homes And trying to make this video Because of the environment created by Coronavirus You can send us an email or you can leave your question in the comments below So the first question which is a very popular question and a lot of people want to know Why are markets going down? Depending on what the situation is Sometimes people are very pessimistic that the market will go down and everyone will try to sell And sometimes people are very optimistic and hopeful that the price will increase in the market They want to buy more So now the market is quite pessimistic, the participants in the market The situation of Covid-19, Coronavirus Because of this the economy The economy will be impacted a lot, many businesses will be impacted And people have this uncertainty About when the economy will revive When will the situation become better, that’s why But then again, it is the work of the market to increase and decrease We can only justify why this is happening There is another factor here that A lot of markets in India is handled by acquires And because of that the market is under a little pressure right now And because of that they have taken some new initiatives because of which probably At least people will reduce betting because of which Because of which atleast people will be less afraid But until this fear is there Covid-19 will not be cleaned out until A lot of our users have asked us that It will be a right time to say that the market is down now so you should invest Second, for how long do you want to be invested And what your risk capability is So you should look at all these factors before taking a call on whether you should invest or not So probably earlier we used to say that if you are investing for 3 years or 5 years You can keep a significant amount of equity But today i will tell you that if you are thinking for 5-10 years If you are thinking of 10 years, then you can invest in equity But if you are thinking of short term then the market can go down or up So will get a good result, specifically in the equity market if you invest for long term But if you have a short term time horizon then probably Every month some of your money must be saved In that case if you put that money in the market If the market goes up or down, you’ll be able to make money in both cases It can go up or down tomorrow The good thing is that, there is a averaging happening You are putting in money today, tomorrow and even day after The market can increase one day, fall down the next day and increase again So in this process, it will be averaged out and you will earn money in the end You should only invest for long term in equities Second thing, you can continue in your SIPs because it gets averaged out When the markets goes down, the day markets go fall down a lot we notice that many users Invest a lot Because we have an activity bias in us As soon as there is some activity in the market, we want to act on it I will invest a little more in mutual fund or buy a few more stocks So one thing we should keep in mind is that Like Varun and Ishan told us, it is very difficult to time the market If it has fallen down, I will invest more Or if it has increased, I will sell it Consider that you keep Rs 5000 aside At this time, government securities or debt funds or liquid funds Should they invest more in these types of investments because there is volatility in the market How should they plan whether they should invest in these now or later or is there some risk here as well So think of this as asset allocation If today, you have kept all your money in equity Because debt mitigates your risk and at the same time it diversifies as well If you have put all your money in debt today You can call that play money as well 10-20% of your portfolio Can be kept in equity because in today’s day and age The benefit of this is your portfolio should always be diversified That can be in equity, debt or even in gold Some investments should be in all those places You should keep some money everywhere If you have a higher risk apetite And you have a long time horizon So keep more in equity If you have a lower risk apetite And your time horizon is short Keep most of your money in debt And gold is another asset class It works very well when equities are down You would have seen in the past three months, that gold has gone up a lot But I will not say that you should not keep 80% of your money in gold You can keep 10-15% in gold, more than that So you should make your portfolio diversified according to your risk profile Do you mean to ask whether to invest in stocks or in mutual funds? A lot of users have asked the question that when the market is falling down Looking that the stock market and reading the news is very dynamic Some people think of it as an opportunity, some fear and some greed Both of them are very different products So I will assume that when people ask the question of mutual funds vs stocks, we are talking about equity investments Because debt mutual funds and stocks are very different They both are very different So your investment is getting diversified in many stocks When the market is volatile The most difficult thing at that time is to choose which stock to buy Because if you look at the market at this time, some stocks are becoming 20-25 + or – And if you look at mutual funds, they are moving by 4-5% + or – So if you look at it this way, anyway mutual funds have a lower risk But when the volatility increases Stocks become even more risky So in today’s time You can lose even 25-30% money in one day, even 40-50% in some cases But if you put money in mutual funds You loss will reduce relatively Because mutual fund is a diversified portfolio They won’t put money in one stock Money will be put in 50-100 stocks So mutual funds are like index, if you look at nifty or sensex They are moving by 4-5% But your individual stock will move 20-25% Like Lalit said when you know a company very well, if you know that even if that has gone down by 25% It has a higher value, only then you should invest in that stock If you don’t have an idea If you’re only guessing then In that case mutual funds are better because your losses will be lesser What are equity mutual funds doing>If you look at Axis mutual funds portfolio for all equity schemes So only 80% of the money that the fund manager has pooled That become -20% or -50% which is called Drawdown For the people who are unable to track day to day stocks Who are unable to understand the news of the market a lot For them mutual funds is a good investment Keeping some money aside The companies that you understand a little, you use their products The market does not work like this You are the owner of some units The value of those units can change It will never go to 0, it will always be above 0 Even if you look at stocks Even if you look at the worst company The value of even that won’t be 0 So your value will never be 0, no one can take your units away from you unless you sell them If the money that you have put in When you’re selling, if the value is reducing at that time But the units that you have They will never be 0 or negative neither can they be taken from you The NAV of some mutual fund is falling more than the others Is it a good strategy to buy the NAV of the fund that has fallen more And buy less of what has fallen down lesser The share price of the company yesterday is not remembered And what it was day before, so the market memory is less So the situation of the world today The price of yesterday is not remembered It doesn’t matter if it falls 5% or 10% It is not necessary that it will go up 10% again It depends on the underlying value of the companies What the price of the stock is, if HDFC is Rs 800 ors Rs 1000, it doesn’t matter It matter what HDFC’s market capitalization is And the amount of money HDFC is making, is it worth the market capitalisation But if you look at the diversified funds like If you look at any large cap funds Which has diversified across industries They haven’t gone down as much