Tips for Advising Your Clients During Volatile Times

Advisors play a vital role in sensitively handling clients’ fears of volatile markets. The clients have apprehensions as to whether the market swings will impact their investments, especially when they are going through a crisis. The response should be a thundering NO.


When market fluctuations are discussed, financial advisors should counsel their clients against fear-driven decisions. In India, a typical market cycle lasts for five-six years, mapping the bull run, bear phase, and back again. Every market bottom has been followed by a peak and vice versa, as the markets move in a cycle. The decision to redeem mutual funds or to sell stocks should be based on the needs and the goals rather than on market levels.


Consider the Goals


The feverish response of the clients needs to be balanced with logic. The focus should be on the goals. If the client is building a corpus for a period of 10 or more years, market flux should be the last thing on his/her mind. The three or five-year performance of funds and stocks should be taken into consideration. If they are performing below the market average, then switching one or two funds is all that is required.


For a mid-term goal, market lows are certainly not the time to sell stocks or redeem mutual funds. Rather, it is a ripe time to invest and to dive into the markets or related funds. Decisions should be based on the individual performance of stocks and mutual funds and not absolute numbers.


Portfolio Management


Portfolios, stocks, and schemes should be monitored continuously. If the targeted returns have been achieved, it is wise to redeem or to shift the gains to safer avenues. For example, if the markets are at a high and the client wishes to redeem and re-invest when the markets undergo correction, then money can be parked in liquid funds, ultra-short-term funds, or balanced funds.


At any point, the choice of funds should depend on the client’s risk capacity. Diversified investment is a sole answer across all risk capacities, types of funds and all market positions.


Keep Calm And Stay In Your Seat


Market highs are a good time to sell and the markets troughs are ideal for investing. Given that the market moves in a cycle, the client should concentrate on building a corpus to meet exigencies.

The health and accidental covers might not be sufficient or cover all ailments. The general insurance might not meet all expenses. The advice to the clients during volatile times should be that a disciplined regime of investment, long haul, and diversification can take care of market volatility and personal crisis.

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