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Q: Stock market has been falling over the past few weeks. Experts say volatility will continue and they may fall further. I feel this is a good opportunity to buy some stocks for a long-term. I don't have disposable cash to invest apart from my SIPs. Is it wise to withdraw a portion of my provident fund and use that money to buy stocks to take advantage of this current volatility?
Prathiba Girish, CFP & Founder, Finwise Personal Finance Solutions, says:
True the past few weeks have been volatile and it does seem like it's not going away in a hurry.
That said I think it's very important for investors to stick to asset allocation. While the fall does seem like a good opportunity for people who have been on the sidelines to enter the market, we would still think spreading out their investment would be a good idea against lumpsum investments.
EPF is a good vehicle which tends to provide a large percentage of retirement corpus when left untouched. We would therefore be wary of making any change to asset allocation in the hope of benefitting from timing the market.
Shalini Dhawan, Co-Founder & Director, Plan Ahead Wealth Advisors, says:
As Indian markets were in the expensive zone, from a long term valuation perspective, if they fall it would be a good opportunity to invest in the equity markets as they become more reasonably valued. However, moving funds which are for your retirement goal such as PPF, EPF or NPS funds may not be prudent.
You could evaluate other assets such as some debt funds, or bank FDs that you may have that you would like to allocate to equity assets. Do not forget your appropriate asset mix and do not go overboard into equity markets as they can remain volatile and even lose capital in certain time frames. It is important to only invest that portion of your money that you are comfortable with keeping for long term horizons such as 5-7 years at least.
Sandeep Bagla, CEO, TRUST Mutual Fund, says:
"Provident funds provide steady tax free returns and keep the capital safe as well. Equities have corrected but they are not cheap as per historical standards. It would be reckless to withdraw from PF to invest in equities, irrespective of market levels."
Renu Maheshwari, CEO and Principal Advisor, Finscholarz Wealth Managers, says:
"We never recommend touching the provident fund for investment. PF is meant only for retirement or Life and Death situation. We warn all our clients against two things - borrowing to invest and withdrawing from retirement fund to invest. It spoils the compounding effect and retirement funding can be hurt badly. Do not try to time the market. Keep investing continuously and steadily for long term and more permanent wealth creation."
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