Q & A with the Mutual Fund Association of Trinidad and Tobago (MFATT)

Racine McKenzie

Manager, Asset Management

Scotia Investments Trinidad and Tobago Limited

MFATT: Designated Representative of Director

Riding the Market Rollercoaster: How Mutual Funds Help You Stay Grounded in Volatile Times 

If you have ever felt anxious watching the value of your investments drop or overly excited when markets surge, you are not alone. Investing often feels like a rollercoaster, filled with thrilling highs and heart-clenching lows, but when your financial future is on the line, those emotions can lead to decisions that can hurt you more than help you. That’s why mutual funds play such a powerful role for everyday investors, offering access to diversified portfolios managed by professionals. Mutual Funds can help cushion the ride in times of market volatility, providing the structure and strategy that many individuals need to stay invested and on track.

Not All Mutual Funds React the Same to Market Volatility

Market ups and downs affect all investments, but the impact is not the same across all mutual funds. For example:

• Money market and income funds, which hold short-term instruments and high-quality bonds, tend to be less volatile. These funds are generally more stable and suited for conservative investors seeking lower risk.
• Balanced funds, which combine both stocks and bonds, tend to experience fluctuations, providing growth opportunities while also helping to reduce the impact of market downturns.
• Equity funds, on the other hand, are more sensitive to market turbulence, often seeing larger price swings in both directions.

While volatility is part of the journey, finding the fund that fits your risk level and financial goals makes all the difference.

4 Things to Keep in Mind When the Market Gets Bumpy

1. The Cycle of Market Emotions Is Real

Investors often go from optimism to excitement, then to fear and panic when markets drop, before returning to hope and relief during recovery. Reacting emotionally when markets drop can lead to costly mistakes, like selling low and locking in losses. Mutual funds offer the benefit of professional management, helping to take emotion out of the equation and keep your investments aligned with your overall goals.

2. Market Corrections Are Normal

All assets go through periods of decline, including those held in mutual funds. History has shown that even after sharp corrections, markets do recover. For example, equity funds may experience short-term losses during a downturn, but they also rebound more strongly when conditions improve. Staying invested, especially through a diversified fund, can help you benefit from that recovery.

3. There Has Always Been a Reason Not to Invest

From global recessions to geopolitical conflicts, every era has had reasons to feel uncertain. Also, as an investor trying to move in and out of the market at just the right time is nearly impossible. Mutual funds help remove the burden of timing the market or picking individual stocks even in times of uncertainty. Even when markets are choppy, staying disciplined can make a big difference over time. It has been proven that long-term investors, who stayed the course were often rewarded.

4. Don’t Avoid Risk; Understand It and Choose the Right Fund for You

All investing involves risk, but not all risks are created equal. Mutual funds come in different risk categories, giving you the flexibility to choose based on your comfort level. Whether you prefer the stability of an income fund or the growth potential of an equity fund, there’s a mutual fund that matches your journey.

Stay Buckled in and Stay Invested

While markets will always have ups and downs, the long-term direction has consistently been upward. Mutual funds offer a smart way to stay the course with built-in diversification, professional guidance, and strategies tailored to your financial goals.

So, when market swings make you second guess your decisions, remember mutual funds are designed to help you grow your wealth, manage risk, and stay focused, no matter the noise.