2022 was a challenging year for investors, the post Covid slump, combined with market instability arising from the Russia-Ukraine war, high inflation amongst others were only a few things that retail investors had to consider.
While India did perform better than most of it’s global counterparts, the effect of all these market fluctuations was felt here as well.
This raises a very important question for all investors, how to make good returns on investment during challenging times like the ones we are experiencing currently.
Earning returns is the foremost motive of any investment. However, one of the essential skills for investing in the market is to handle volatility and fluctuations smartly and wisely. Whenever the market falls, an investor faces the dilemma of what should be the next strategy. This raises an important question — How can an investor earn good returns from the market? What is the right time to exit the market? Let’s answer all these questions!
How to Earn Good Returns?
Earning good returns is not a difficult task if you invest smartly. Investors are always in search of the best investment plan with high returns. The foremost rule is to invest in assets that provide inflation-beating returns. Otherwise, your portfolio will depreciate even after providing positive returns. Certain investment instruments that provide a return higher than the inflation rate include stocks and mutual funds.
- Investments in Stocks
Equity stocks are among the highest return generating assets. However, they are equally risky as markets tend to be volatile in the short term. Returns shouldn’t be the only factor while investing in shares. Other factors like the company’s prospects, industry, financial standing, and profitability also play an important role.
You can shortlist the stocks with the highest returns and analyze those based on the above criteria. If you find the stock a good fit for your portfolio, you can go ahead with investing.
- Investment in Mutual Funds
Mutual funds are one of the best investment options with high returns. Moreover, mutual funds are a great diversification tool. Mutual funds pool money from the investors and invest it in a certain specified class of assets based on the theme of mutual funds. You can find several high return mutual funds in India.
Investment in mutual funds can be made in the following ways:
Lumpsum Investment: You can invest a lumpsum amount to park your excess funds. This is the strategy adopted by the investors when the market has hit rock bottom or when the financial year is nearing its end and investors want to gain tax benefits.
SIP Investment: An SIP is a Systematic Investment Plan. In this investment method, an investor invests a specified amount each month in the mutual fund. This teaches investing discipline and prompts investors to prioritise investing over spending.
- Rupee Cost Averaging
To earn good returns on investment, it is important for an investor to time the market before investing. If you invest when the market skyrockets and stocks or units are overvalued, your portfolio value will drop in the short term.
SIP provides a peculiar benefit of rupee cost averaging. When the markets are low, the prices of all mutual fund units fall. Therefore, you can purchase more units for the same monthly investment. When the markets are high, even though the number of units is less, however, the value of each unit increases. This averages out the cost of investment. This is known as rupee cost averaging.
When should I exit the market?
Whenever the market falls, investors tend to panic and sell their holdings. However, they should remember that good returns are made by investing in challenging times. You can buy the best stocks at low prices whenever the market takes a dip. You might even find some stocks at dirt-cheap prices that are trading at their 52-week lows. If you find the stock fundamentally strong and trading at such low prices, it’s time to get hold of that stock and include it in your portfolio.
Historically, markets have consistently risen after a fall, whether it’s the 2008 financial crisis or the COVID-19 pandemic. Panicking and selling your holdings at cheap prices will only realize your notional losses. Unless you sell, you are not at a loss. Whatever you see is the notional loss and not the actual loss. It becomes an actual loss only after you sell. If you have patience during tough times, the market will reward you with good returns on investment after it bounces back.
Kuvera can help you find the stocks with the highest returns and the best high return mutual funds for your portfolio. You can also find short-term investment plans with high returns. With all the financial information available on a single platform, you can analyse and invest any time anywhere
Interested in how we think about the markets?
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