East or West, Mutual Funds are the Best !
The Share market has been as usual very volatile for the last few weeks and one wonders as to what position one has to take in such volatile markets- Long or Short- Bull or Bear position? This dilemma is never new to the Investors in share markets for long. Yes, Confusion confounded. This quandary or sticky situation could possibly overcome through constant and consistent investment in Mutual Funds. Yes, whether market goes up or down you are the winner as more Units will fall into your kitty during the bear phase and the average rate of purchase of Units will always be low.
So what is the panacea? Yes, in a volatile market like now, better to opt for diversified fund instead of sectoral fund as the latter tend to be more volatile since performance is determined by the underlying factors driving that sector. Sectors may encounter different cycles lasting for varying periods, at times exceeding even beyond five years. The best example is Shipping. Over all sectoral funds should be considered only if one has a specific view on the sector and can tolerate higher volatility. So it is safe to stick to diversified equity funds.
As we know there are various categories of equity funds including large cap, diversified equity, mid cap, small cap, international equity, ELSS, sectoral etc., Funds within each category have a similar investment mandate which determine their risk and return characteristics. Small and mid cap funds are suited for a horizon of at least 7- 10 years, whereas large cap funds are suited for5-7 years. One has to decide his the investment horizon and risk appetite which would help determine the mix of equity fund categories to be held in the portfolio. Long term consistency of Fund performance is driven by multiple factors like quality of investment team, strength of investment process and philosophy and guidance of the fund house Compare past three years’ annualized returns and compare with their peers and benchmark indices. Research companies provide analysis and data leading rating of Funds.60-65 % of our investible funds can be routed through SIPs into diversified Equity funds that invest in large, mid and small cap stocks and the reminder in well-rated debt funds or dynamic bond fund.
So idle money in Banks gets eroded in value due to inflation; So invest smartly in MFs- SIP.