The first question that comes to mind when one thinks of investing in such a market is: where should I start investing? Or Which schemes will be ideal for me. Mutual fund advisors have an elaborate answer for you. The basics of mutual fund investing remain the same: one should invest in line with the risk profile and investment horizon.
Simply put, it means Invest in equity funds only if you have the nerve to stay the long term. In other words, you shouldn’t rush to redeem your investments at the first bout of volatility in the market. Be forewarned, hitting the enter button fast would only help you to lose more money instead of making extra returns.
However, if an investor has to choose one category, which would that be. Mutual fund advisors have different views on this question. “At this current expensive juncture, it is always better to stay cautious and not try stunts as no one can predict what lies ahead. I would bet on quality value / contra funds and balanced advantage / dynamic asset allocation funds for new investors,” says Rushabh Desai, an AMFI-registered mutual fund distributor based in Mumbai.
If you have a higher risk appetite, Desai suggests that value funds can be beneficial. “Value / contra funds focus on buying undervalued / underperforming quality stocks to capture the upside price potential. On the other hand, BAF’s / DAAF’s focus on the upside by increasing equity exposure when markets are cheap and reducing it when markets are expensive. The BAF / DAAF category is for those investors who prefer less volatility than pure equity funds and based on different market situations would like to get timely rebalancing between equity and debt segments,” says Rushabh Desai.
Balanced advantage funds or BAFs seem to be a clear choice of mutual fund distributors and advisors. The topper in this category, HDFC Balanced Advantage Fund, has offered around 48% returns in one year and it has 68% allocation to pure equity at this point in the market. Rushabh Desai recommends – Edelweiss Balanced Advantage Fund, DSP Dynamic Asset Allocation Fund for moderate risk takers and Invesco India Contra Fund and L&T India Value Fund for aggressive investors.
Existing mutual fund investors should also make some changes to their asset allocation and keep a tab on their investments, says Arun Kumar, Head of research, FundsIndia. “Mutual fund investors should continue with their original asset allocation. If their equity allocation has exceeded their original intended allocation by more than 5% due to the market rally, this is a good time to rebalance it back to the original asset allocation. Within equities, old investors can diversify across different investment styles, market cap segments and global markets,” says Arun Kumar.
He says Dynamic Asset Allocation Category is a good choice for new investors. “Funds like ICICI Prudential Balanced Advantage Fund and Kotak Balanced Advantage Fund can be considered for long term financial goals,” says Arun Kumar.
If you are looking for recommendations, read,
Best balanced advantage funds or dynamic asset allocation funds to invest in 2021
