Stock markets have reacted sharply to the war which is taking place between Russia and Ukraine. Both BSE Sensex and NSE Nifty ended in RED on Feb 25, 2022, a day after Russia launched a full-scale attack on Ukraine. While Sensex plunged 1,974.45 points to end at 55,858.52 as opposed to 57,832.97 a week ago on Feb 18, 2022. NSE Nifty, on the other hand, fell 617.90 points to finish at 16,658 on Feb 25. In fact, on Feb 24, when Russia invaded Ukraine, BSE investors lost as much as INR 13.57 lakh crore as panic selling took the market by storm.
So, people are asking – whether they should stay invested in equities or pull out from them? The question assumes significance as neither Russia nor Ukraine is willing to soften on the geopolitical crisis existing between the two. Let’s check the investment moves they should make amid the Russia-Ukraine War.
How to Deal with Your Equity Investments Now?
Historically speaking, stock markets have recovered faster than expected from several crises they have had to go through. A recent example is the Sensex touching 60K in 2021 from the dramatic lows of 25,000 in March 2020 when COVID made investors press the panic selling button.
Although the sustained stock selling pressure may make you nervous, sticking to equity investments is still advisable. Because as the war gets over, the market could notch up at a faster rate, leading to a massive rise in your investment value. More so if you have invested through a Systematic Investment Plan (SIP) that comes with a rupee-cost averaging concept. So, as the market falls, which is the case now, your investments will buy more units at a lower price and less units at a greater price as the market grows. What it does is reduce your average investment cost and boost the scope for higher returns.
What is SIP and How Can You Invest Through the Same?
An SIP is a mode through which you can invest in mutual funds, a pool of money collected from different investors. These funds would further invest your money across a wide range of stocks to ensure investment diversification. Qualified fund managers supervise and manage your investment portfolio by choosing the stocks wisely and making subtle changes as and when required.
You can invest in an SIP with as low as INR 500 monthly. So, if you’ve invested in stocks directly and are facing a loss due to the war, wait till your investment recovers smartly. Once that happens, switch to an equity mutual fund that must have delivered good returns to investors for 5-10 years. Mutual fund investments make more sense if you don’t have in-depth market knowledge.
Should I Shift My Equity Investments to a Unit-linked Life Insurance Plan?
Yes, you can! A Unit-linked Life Insurance Plan (ULIP), which offers both life cover and investment benefits, works much like a mutual fund. You can have the fund managers propelling your ULIP investments. You will get a list of funds to choose from when buying ULIPs. Before choosing a fund, see how consistent it has been over the years. The life cover will ensure your family gets the sum assured should you die during the policy term. For even ULIPs, shift from direct equity investments only after you recover from the current crisis.
Should I Invest in Gold?
Uncertain economic and political developments do make a case for gold investments. Besides equities, you can invest some in gold too to make the most of the current bullion rise. The 24K rate is above INR 50,000 for 10 grams of gold across several cities of India. The gold price might grow even more if the Russia-Ukraine standoff lasts long, raising the scope for more returns.
Note – BSE Sensex and NSE Nifty data are sourced from Business Today