Fund Management Strategy

Having a capital management strategy is essential when investing all of your money in equity, particularly in times of market decline. Here are some suggestions for wise money management and being ready to increase your investments during a bear market:

 

1. Allocation and Diversification Methodology
Core and Satellite Methods: A smaller percentage of your investment should be allocated to high-risk, high-reward ventures, while the majority should be kept in comparatively stable, blue-chip companies or ETFs. This offers some liquidity and stability.
Fixed Distribution: Establish a stable equity allocation, such as 70% equities, 30% cash, or 30% bonds, and rebalance it on a regular basis to keep it that way. In this manner, you will purchase stocks at a low and sell them at a high.
 

2. Establish a Reserve Fund
Maintain a separate emergency fund in short-term or liquid investments, such as bonds, liquid mutual funds, or money market funds. This will enable you to have money on hand without having to sell your current investments for a loss.
 

3. The Plan for Systematic Withdrawal (SWP)
Create a fixed monthly income stream (SWP) from a debt or balanced mutual fund if your portfolio is large. During a market slump, this can function as a consistent source of funding for stock reinvestment.
 

4. Finance on Margin
Proceed with caution while using the available margin against your current holdings. Margin money can magnify gains as well as losses, so only use it if you are confident in your investing decisions and have a good exit strategy.
 

5. Security Pledges
To obtain a margin that can be used for additional investments, you can pledge your current stocks or mutual funds on a number of brokerage sites. You can raise money in this method without having to sell your current investments.
 

6. Plan for Systematic Transfer (STP)
You can set up a STP to automatically move a predetermined amount into stocks on a regular basis if you have some money stashed away in a liquid fund. During recessions, you can invest methodically with this strategy.
 

7. Bringing in Money from Other Sources
If you have additional money from sources like dividends, rent, or freelancing, think about using it to make investments while the market is down.
 

8. Allocation that is dynamic
Adopt a dynamic allocation strategy, modifying your exposure to equities in response to changes in market prices or predetermined indicators, such as the index's P/E ratio.

 

9. The Strategy of Value Averaging
You can adopt a value averaging technique, which involves adjusting the amount invested based on market conditions—investing more when the market is down and less when it is up—instead of spending a fixed amount on a monthly basis.

 

10. Managing Risks
Reduce losses during downturns by using protective put options or stop-losses, which can assist save money for future investments.

 

11. Utilizing Substitutes
Using covered calls or protective puts, if you feel comfortable with derivatives, can help safeguard your portfolio and produce income by giving you more money to invest during downturns.

 

You may make sure you have money on hand to profit from market downturns without placing undue strain on your finances by combining these tactics.