The mutual fund investors during such market fluctuations find it difficult to decide on the asset allocation they should have in their portfolio to get better returns and also to limit the downside volatility. The asset allocation should be based on one risk appetite, investment horizon, and goals or the liquidity requirements.
“Asset allocation should not be based on market situations. It should be based on one’s Risk taking ability, the Tenure of investments and finally on one’s liquidity needs. If these factors are considered before investing there is no need to worry in any market situation,” said Thomas Stephen, Associate Director and Head -Preferred, Anand Rathi Shares and Stock Brokers.
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The Nifty50 crossed the 25,000 mark on the first day of August then declined to 24,000 level and bounced back to 25,000 level. It closed at 24,852 on the last trading day.
Amid the ongoing volatility in the market, which asset class to choose in the current situation?
“One should diversify across all asset classes based on their risk appetite. If one has a longer tenure for investments then considering the encouraging macros, India’s growth outlook and the buoyant equity markets, investors should increase their exposure into equity MFs. Though the growth outlook is captured in equity valuations, the investment cycle is expected to continue, as the recent quarterly earnings were in line with expectations,” said Stephen.Among equity mutual funds, there are around 21 sub-categories including sectoral and thematic funds. In August, sectoral and thematic funds ruled the return chart and pharma & healthcare funds offered the highest return of around 6.33% in August. Small cap funds gave 2.33% return in the same time period.
Multi cap and large & mid cap funds gave 2.19% and 2.02% returns respectively in the said period, followed by flexi cap funds which gave 1.71% return. Mid cap and large cap funds gave 1.64% and 1.20% returns, respectively.
After looking at the current market situation and performance by the funds, within equity what kind of mutual funds should one invest in at this stage?
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“In equities Large cap oriented strategies (Large Cap /Flexi Cap/Multi Cap /Large and Mid Cap Funds) are better placed as investors aiming for long term wealth creation should aim for quality investing over momentum investing,” recommended Thomas Stephen.
In 2024 so far, infrastructure sector based funds have led the return chart and gave the highest return upto 48.33%. HDFC Defence Fund, the only active fund based on defence sector, gave 44.35% return.
Invesco India Focused Fund gave 37.33% return in the same time period. Mahindra Manulife Mid Cap Fund gave 33.15% return in 2024 so far. Kotak Emerging Equity Fund, the second largest mid cap fund based on assets managed, delivered 32.45% return in the said period.
Nippon India Small Cap Fund, the largest small cap fund based on assets managed, gave 29.76% return in the same time period.
Now the next question which comes is SIP or lumpsum – which mode of investment should they choose?
“In line with a longer term perspective, I would suggest a staggered approach to investment via SIP or STPs to smoothen the impact of market volatility,” recommended Stephen.
Note, we considered all regular and growth options for the analysis. One should always consider risk appetite, investment horizon, and goal before making investment decisions.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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