How can one utilize market corrections to strengthen investments?

ET Spotlight
Over the last two months, the world seems unrecognizable. Covid-19 has taken it by a storm. The Indian stock markets have crashed amid increasing fears that economies around the world are heading for a recession. However, one needs to understand that markets are like cardiograms. Just the way ups and downs on a cardiogram are essential, markets are not meant to be linear either. Investments are not about a moment in time, but about a process over a significant period of time. In fact, market corrections open up big pockets of opportunities. Experts say that intermediate corrections are always healthy in a market as they remove the froth. Panic-selling your investments in this scenario is a bad idea, as you may be making your losses permanent (by booking them).

Regardless of the volatility of the markets, people need to have their eyes on the decided investment goals. A falling market gives the possibility of purchasing at lower and attractive market valuations. If some are still far off from their goals, the strategy should be to stay invested and make fresh investments gradually to make the most of the crashing prices. As we know, it’s difficult to time the markets, and predict the top and bottom of markets accurately. We could see some more short-term volatility in markets as Coronavirus cases continue to escalate, and uncertainty prevails. However, it would be prudent to at-least get started (by investing in a gradual manner), and not to panic and sell-off.

Since investments are more about the big picture, in such a scenario, ULIPS aid in wealth creation and insurance, too. It gives the dual benefit of savings and protection. Existing investors need to keep paying their premiums to accumulate more units, which will help them to average out the cost as they will be buying more units at lower NAV in the long run. Exiting at this level might not be a good strategy. The market will continue to have its good, bad, and ugly days. There’s not much to gain by putting yourself on tenterhooks with every move that it makes.

A smart investor will always tend to invest more in times of market panic. For those who are wondering, where to find such look-ins, Bajaj Allianz Life Equity Funds have demonstrated a good performance during market upturns and downturns.

Market Downturns
Market Upturns

Bajaj Allianz Life Equity Funds (large-cap and mid-cap) have been able to protect downside risk on a relative basis, in several market downturns such as the 2008 global financial crisis, 2011 European debt crisis and even now during the current market correction. During the market upturns of 2009, 2014 and 2017, these funds have also delivered a healthy performance. Therefore over a market cycle, these funds have delivered better returns regardless of tumultuous circumstances.

Morningstar, an independent fund rating agency, has also given a ranking of 4 to 5 stars to Bajaj Allianz Life Equity Funds historically, indicating that they have delivered superior/better risk-adjusted returns over the long term and their ability to protect downside risk—when compared to peer funds.

Morningstar rating Trend
(Source: Morningstar Direct)

While the need of the hour is to stay invested, one also needs to understand the significance of drawing fresh premiums. This is the time to accumulate systematically. Some of the products that people can consider to move their money are the following:

Bajaj Allianz Life Future Wealth Gain

The key advantages include the addition of the percentage of the annual premium to the maturity amount, loyalty additions and maturity benefit.

  • Zero Premium allocation charges for policies of over Rs 3 lakhs annual premium
  • Zero Policy admin charge for first 5 policy years
  • Life Covers with Tax benefits under Section 80C and 10(10D) of the Income Tax Act

Bajaj Allianz Life Future Gain

The key advantages include maximum premium allocation, choice between two unique portfolio strategies, and the option of seven funds.

  • Zero Premium allocation charges for more 2 lakhs annual premium
  • Life Cover with tax benefits under Sections 80C and 10(10D) of Income Tax Act

Bajaj Allianz Life LongLife Goal

The key advantages include the choice of retired life income to fulfil retirement goals and the whole of life insurance cover.

  • Tax-free retired life income
  • Whole Life Insurance Cover
  • Periodic return of life cover charges
  • Life Cover with tax benefits under Sections 80C and 10(10D) of Income Tax Act
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A calmer long-term perspective will take your portfolio far. Beating yourself up with the ‘woulds and shoulds’ is a wasteful exercise — remind yourself that all investments have risk. Volatility is an inherent feature of markets. One way to deal with it is to stay invested, and not let fluctuations be a cause of worry. One does not have to transform their investment strategy. In times of market volatility, asset allocation becomes quite important for an investor’s portfolio. After all, investment is a long-term activity.
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