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Stay put is the call for existing investors

Here’s a five-point checklist for the retail investors
By Preeti Kulkarni | April 29, 2017

Tempted to redeem your equity investments to book profits after stock market surge?  Read on to know what financial advisors have to say before you make your move.

With equity portfolios of many retail investors mirroring the historic high of stock markets, it is natural to entertain the idea of safeguarding profits earned by redeeming some investments.

However, experts caution against such knee-jerk reactions, advising retail investors to maintain focus on their goals instead. Here’s a five-point checklist for such investors:

1. Stick to your goal-oriented plan

Once you identify your goals and chart out a path to achieve them, it’s best to adhere to it. Letting market movements disturb your strategy can affect the chances of attaining your goals.

2. Continue your SIPs

Investments in mutual funds through the systematic investment plan (SIP) route are made with a long-term goal and tenure in mind. Do not let the stock market bounce be the sole reason for discontinuing them prematurely—it can set your long-term goals like retirement planning back by several years.  “A monthly fixed investment amount ensures that you buy more when the market is down and less when the market is up. Which is exactly what you should be doing,” says Kunal Bajaj, founder and CEO, Clearfunds, an online direct mutual fund advisor. 

3. Avoid the lure of small- and mid-caps

Resist the allure of small- and mid-cap stocks at this stage to avoid being scalded by any sharp correction in the market. “Don't stray away from your long term plans and change your investment strategy by buying into small and mid cap funds,” says Bajaj.

4. Rebalance in line with asset allocation

If the proportion of equities in your portfolio has crossed the threshold as per your asset allocation plan, reduce the exposure to adhere to the original debt-equity ratio. You can exit some equity investments to correct the imbalance and move the proceeds into debt instruments.

5. Weed out non-performers 

While you need not make drastic changes to your goal-linked investments, keep an eye on under-performers that have been dragging down your portfolio returns. The lifetime high peak scaled by the indices would have pushed up even such stocks and mutual fund schemes in your portfolio. If they have been laggards, use the opportunity to book profits and exit such investments. "However, do not redeem only on the basis of recent performance. Switch out after taking into account their returns across market cycles," says Harshvardhan Roongta, financial planner and CEO, Roongta Securities. 

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