Investments during the times of war and conflict
Why Staying Calm Is Crucial for Long-Term Investors
When a nation faces conflict—especially something as severe and emotional as a war with terrorists—the ripple effects are felt not just on the battlefield but in the economy and financial markets as well. For Indian investors, particularly those with systematic investment plans (SIPs) in mutual funds, this can be a time of anxiety. Markets can turn volatile, news headlines can be alarming, and the instinct to “do something” with your investments can feel overwhelming. The best way is to keep calm and have patience. There may be many ups and downs, but good time will definitely come.
However, history, reason, and discipline all suggest one thing: keep calm and stay invested.
The Short-Term Panic vs Long-Term Perspective
Geopolitical events—including war, terrorism, and border tensions—often lead to immediate reactions in the stock market. These reactions are mostly driven by fear, speculation, and short-term trading sentiment. Prices may dip sharply, sometimes within hours of a conflict being announced or escalated. But historically, these dips have often been temporary.
Take for example the Kargil War in 1999. The Indian stock markets did react to initial news, but the long-term trend remained intact. Similarly, during the Uri surgical strikes and the Balakot air strikes, markets initially showed jitters but stabilized shortly thereafter. What this tells us is that markets are resilient, and more importantly, they price in news quickly and then move forward based on fundamentals.
SIPs: Built for Volatility
Systematic Investment Plans are designed to work best when markets are volatile. When markets drop, your SIP buys more units at a lower NAV (Net Asset Value). Over time, this rupee-cost averaging reduces your average cost per unit and enhances your long-term returns.
Interrupting SIPs during uncertain times defeats the whole purpose of long-term investing. You may save yourself from a short-term fall, but you also miss out on the opportunity to accumulate more units when prices are low. If you stop your SIPs and the market recovers (as it often does), you might end up re-entering at higher levels, missing the rebound gains.
Don’t Let Emotions Drive Your Portfolio
War, especially one triggered by terrorist attacks, is not just an economic event—it is a deeply emotional one. But emotional decisions and investing do not go well together. The disciplined investor understands that uncertainty is part of the investing journey.
Instead of reacting impulsively, it’s more prudent to observe how the situation unfolds. Governments, central banks, and financial institutions all have protocols in place to handle times of national emergency. Defensive sectors like FMCG, pharma, and utilities often provide stability during such periods, and fund managers know how to shift allocations accordingly.
Reassess, But Don’t Overreact
If you’re still feeling anxious, this could be a good time to reassess your risk profile—not because of panic, but to ensure your asset allocation still aligns with your financial goals. Speak with a financial advisor if you need reassurance or help to rebalance your portfolio. But avoid wholesale changes based purely on geopolitical fear.
Gold funds, debt funds, and arbitrage funds can offer temporary safety if you absolutely want to reduce equity exposure. But these moves should be strategic, not reactionary.
Conclusion
War is unsettling. The headlines will be dramatic, and the markets may not be immune to short-term tremors. But if your goals are long-term—retirement, children’s education, or wealth creation over decades—then the best course of action is to stay the course. Mutual funds, particularly through SIPs, are equipped to navigate these rough patches.
So, while India may be at war with terrorists, let your investments fight their own quiet, consistent battle—compounding over time. Keep calm, keep investing, and keep an eye on the situation without letting fear take the wheel.
