How should we invest in the present market condition?

Published on / By M. Pattabiraman Twitter: @pattufreefincal / 10 Comments

Published: October 6, 2018 at 8:22 am

Last Updated on February 12, 2022

A question many people ask today is, How should we invest in the present market condition? I discuss simple ways to stay focused and navigate the present market condition. I would wager that five out of every 10 mutual funds or stock investor is fairly new having entered around 2014 or later. The downward movement in the market, although quite normal, maybe hard to digest for many. Therefore it is time to slow down and think clearly.

How one should react to market volatility largely depends on the age of the investor and their purpose behind investing. Let us consider strategies for some generic situations.

How to handle the present market condition

How to handle the present market condition

  1. I am a 30-something (or younger) investor. I am investing in my future via equity markets. I either know what my goals are or undecided as yet. However, I need the money only after 20-25 years or more.
    • Suggestion: Do nothing other than invest as much as possible each month!
  2. I am a 40-something investor. I am investing for my future goals likes retirement, children’s education. I need the money in 10-15 years. I have been investing in equity for the past 5 years or more.
    • Suggestion:  Option (1) Reduce your equity exposure to 50% and decrease it further in the coming years. Option (2) For your child’s education find out the current cost of a UG education and ensure you have at least 50-100% of that amount in your fixed income instruments, and leave it there. Option (3) If your equity exposure is already not too high and falling every day then you can consider rebalancing as mentioned in “my strategy” below.
  3. I am 50-something investor I have been investing in equity for about ten years or longer. I need the money in the next few years.

Notice that for 40- and 50-something investors, I only talked about reducing equity exposure. The reason for that is a market fall is a mixed blessing. For young investors, it is a gift. It gives them the opportunity to appreciate volatility first-hand with no pressure so that they can handle it better in their 40s and 50s.

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!


    🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

    For 40+ investors, it could well be a curse. The risk associated with already invested capital is huge and protecting that is the first priority. Kids with not much of invested capital talk incessantly about buying on dips. It is important for those who have been investing for some years now to worry about the capital already invested first!

    That is the reason I believe that new investors should just keep investing as already pointed out: Dear new investor this is the best time for you to invest in equity

    How NOT to worry about the present market condition

    I can think of two radically different, yet efficient ways to navigate turbulent market conditions. They, however, have a couple of common features that stand apart.

    1. Do nothing. Just because the market moves up and down, why should you react? Invest as usual as per plan, as if nothing has happened.
    2. Follow a tactical strategy. Use a technical indicator and use only those technical indicators and decide when to sell equity exposure and when to re-enter
    3. Ignore all opinions and market news. Read more: 10 things mutual fund investors should not be doing!

    Either you plan to invest systematically and reduce risk systematically or you invest tactically and reduce risk tactically. Anything in between like buying in dips is not of much use. Want proof? See: Buying on market dips: How effective is it?

    To understand more about systematic risk reduction, see How to systematically reduce the risk associated with a SIP and How to reduce risk in an investment portfolio.

    As regards technical indicators, there are several to choose from, you can explore the tactical market timing backtest archive and pick one. They will worry as long as you do not claim what you are doing is the best. We will consider the present status of several technical indicators in the next post.

    Wait a minute, you said “do nothing except investing as per plan”. How do I make a plan? Just Download the Freefincal Robo Advisory Software Template, punch in the numbers and you got yourself a start-to-finish plan. If you want fund suggestions, you can consider  my handpicked Mutual Funds September 2018 (PlumbLine)

    My strategy

    I have already mentioned it here, but let state it again briefly. I am a 40-something and have been investing for ten years now. My equity exposure is rapidly falling from its planned 60% every day. If there is a significant fall, I might be tempted to pull out some funds from my PPFs (my wife has her own) and invest in equity for my retirement.

    For my son’s education, I have an arbitrage fund as part of my debt component. I might switch that to an equity fund but ensuring that the total debt allocation still has an amount equal to the current cost of UG education.

    So far I have not looked at my portfolio for weeks now and invested, as usual, this month. Let me close with my favourite line from a fine modern western – Tombstone. If you are stressed about the markets, say this to yourself.

    Stay calm, use your head and you will be all right

    Do share this article with your friends using the buttons below.
    🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
    Use our Robo-advisory Excel Tool for a start-to-finish financial plan! ⇐ More than 1000 investors and advisors use this!
    New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
    • Follow us on Google News.
    • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
    • Join our YouTube Community and explore more than 1000 videos!
    • Have a question? Subscribe to our newsletter with this form.
    • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
    Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!


      Explore the site! Search among our 2000+ articles for information and insight!

      About The Author

      Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
      Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
      Our new course!  Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
      Our new book for kids: “Chinchu gets a superpower!” is now available!
      Both boy and girl version covers of Chinchu gets a superpower
      Both boy and girl version covers of Chinchu gets a superpower.
      Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
      Feedback from a young reader after reading Chinchu gets a Superpower (small version)
      Feedback from a young reader after reading Chinchu gets a Superpower!
      Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
      Buy the book: Chinchu gets a superpower for your child!
      How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
      Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
      We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
      About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
      Connect with us on social media
      Our publications

      You Can Be Rich Too with Goal-Based Investing

      You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
      Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

      Your Ultimate Guide to Travel

      Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)