Ways to Protect your Mutual Fund Portfolio from Stock Market Crash
Stock markets are down by over 10,000 points, i.e. 25% in the last 10 days. If you are mutual fund investor, you would have seen erosion of the NAV of the funds in which you have invested. The reason could be corona virus or fall in crude oil prices and 100 other reasons. Is it really possible for mutual fund investors to protect their mutual fund investors? The answer is Yes and No. This would depend on how you view them. In this article, I would provide various ways to protect your mutual fund portfolio from stock market corrections or stock market crash.
Why Stock Markets are taking correction?
One should understand why stock markets are taking correction to understand whether this is short term fall or global market fall.
1) Corona virus – This is creating panic across the world. A couple of days back WHO has declared the virus outbreak a pandemic, which means it is a global issue affecting most of the countries.
2) Ban on Travel: With WHO indicating it as a global pandemic, many countries has cancelled all visas and put travel ban. Means one cannot travel from one country to another. In India, all visas are cancelled now.
3) Foreign investors, sell-off: In this current situation, foreign investors who invested in Indian stock markets started pulling off money now as there is global fear.
4) Yes Bank Crisis: RBI has issued moratorium on Yes Bank and restricted its transactions. It restricted cash withdrawals per account holder. This is adding fuel to the fire. There are several mutual fund schemes that invested in Yes Bank debt papers which are affected now.
5) Fall in Crude Oil Prices: In the last few days, fall in crude oil prices also hit the sentiment of the stock markets.
6) International Markets down: All global markets are reacting negative to all these instances. If you have invested in some of the international mutual fund s