inflation beating returns
The major reason behind volatility is rising interest rates. Central bankers have decided to use their old tool of rising interest rates to control inflation. While volatility may be far from over, investors should not lose sight of their enemy number one – inflation. Stocks can help you beat inflation in the long run provided you choose the right stocks. Long-term compounding works in your favor to generate inflation-beating returns and this is evident in the case of well-managed portfolios as well. According to Value Research, flexi-cap funds have given 13.54% returns in the 10-year period ended June 17, 2022.
attractive valuation
Falling markets mean there are stocks available at attractive valuations. It’s like shopping at a place where there are big sales. If you love discounts, Dalal Street is where you should be shopping now. Low price-to-earnings ratio means availability of companies at attractive prices. Also the discount on fair value varies from stock to stock and the best deals may be available in stocks that are not present in the major indices. A fund manager can locate the best deals in the stock market and advise you accordingly.
professionally managed
The scheme portfolios have been prepared in line with clearly defined asset allocation norms laid down by the financial market regulator. This ensures that you get what you want. You can choose the right plans as per your long term financial goals and your risk profile. For example, an investor with a ten-year outlook and substantial risk appetite may consider some allocation to small-cap funds. Another investor who has a five-year outlook and wants to take exposure to established names in the stock market, might want to stick to large-cap funds.
different styles
Many a times, individual investors are ready to put in the effort and practice the art of selecting well-established companies for investment. In this way they adopt a method of investment. Some are good in certain areas and have developed a style of investing – growth or value or quantitative. But each stock-taking approach has its advantages and limitations. And no one can be the master of everything. In such a case, diversification into various investment factors as they are called in industry parlance- value, growth, quality, momentum- can be done by using equity funds. This not only improves your portfolio returns over time but also reduces risk.
rupee cost averaging
The biggest advantage of investing in equity funds is that a portfolio of stocks with a small amount is built up. One can invest in a portfolio of categories – month to month or at regular intervals of choice maybe daily, weekly, monthly. When the market is going down, you get more units and when the market is going up, you get fewer units. In the long term, when the markets go up, your average cost of purchasing all the units can be much less than the then prevailing price (NAV) of the unit, giving you a reasonable profit.
Different investments through SIP help us to reduce the risks associated with time. You should not invest all your money when the market is at historical lows.
Views are personal: The author – Anoop Bhaiya is the founder of Money Honey Financial Services Pvt Ltd
Disclaimer: The views expressed are those of the author and are personal. TAMPL may or may not subscribe to it. The views expressed in this article/video are in no way trying to predict the markets or time them. The views expressed are for informational purposes only and do not imply any investment, legal or taxation advice. Any action taken by you based on the information contained herein is your sole responsibility and Tata Asset Management will not be liable in any way for the consequences of such action by you. There is no guarantee or assured return under any of the schemes of Tata Mutual Fund.
Mutual fund investments are subject to market risks, read all the scheme related documents carefully.