The first question that comes to mind when I think of investing in such a market is, where should I start investing? Or which plans would be ideal for me. Mutual fund advisors have a detailed answer for you. The basics of mutual fund investing remain the same: Invest according to your risk profile and investment horizon.
Simply put, it means investing in equity funds only if you have the guts to stay for the long term. In other words, you should not rush to capitalize on your investments in the first round of market volatility. Be careful, pressing the enter button too fast will help you lose more money instead of giving you extra returns.
However, if an investor had to choose one category, which would it be. Mutual fund advisors have different opinions on this question. “At this current costly juncture, it is always better to be cautious and not try stunts as no one can predict what will happen next. I am looking for new investors on Quality Value / Contra Funds and Balanced Gain / Dynamic Asset Allocation Funds I’ll bet,” he says. Rishabh Desai, an AMFI-registered mutual fund distributor based in Mumbai.
If you have a high risk appetite, Desai suggests value fund can be beneficial. “Value/contra funds focus on buying undervalued/underperforming quality stocks to capture the upside price potential. On the other hand, BAF/DAAF focus by increasing equity exposure when markets are cheap and reducing it when markets are expensive. The focus is on the upside. The BAF / DAAF category is for investors who prefer less volatility than pure equity funds and want to achieve timely rebalancing between equity and debt segments based on various market conditions,” says Rushabh Desai says.
Balanced Advantage Fund Or BAFs seem to be the obvious choice of mutual fund distributors and advisors. The topper in this category, HDFC Balanced Advantage Fund has offered around 48% returns in a year and has 68% allocation to pure equities at present in the market. Rishabh 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.
Arun Kumar, Head of Research, FundsIndia, says that existing mutual fund investors should also make some changes in their asset allocation and keep an eye on their investments. “Mutual fund investors should continue with their original asset allocation. If their equity allocation has exceeded 5% from their original intended allocation due to a market rally, it is a good time to return it to the original asset allocation. Within equities, older investors can diversify across different investment styles, market cap segments and global markets,” says Arun Kumar.
He says the dynamic asset allocation category is a good option 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 on,
Best Balanced Advantage Funds or Dynamic Asset Allocation Funds to Invest in 2021