mutual funds: Amid the bloodbath in the stock market due to the Russo-Ukraine war, equity mutual fund investors are busy finding investment avenues that can help them save their money in this volatile market. According to investment experts, one should have a mixed portfolio of debt and equities with a pre-determined portion of debt allocation, so that it can be shifted to equities in case of a slight dip in the equity market. Similarly, once the volatility ends and the market stabilizes, the portion of debt that has been transferred to equity should be brought back to its normal ratio. He said equity mutual fund investors can take advantage of such volatile markets if they have a diversified portfolio.
Talking about investments, it explains what an equity mutual fund investor can sustain during volatile markets; Arun Kumar, Head of Research at FundsIndia said, “The simple idea is to accept temporary downside and uncertainty as an ’emotional fee’ to be paid for reasonable long-term returns. While the short-term market movements are not within our control, how we It is completely under our control to react and take advantage of any sharp drawdown. This is what we try to do by preparing and pre-loading our decisions for different market scenarios. This way you Are able to live with a normal 10-20 percent. 100% of the tantrums that the market throws at you without panic. Plus, the real of repeated big falls that turn out to be opportunities in retrospect Time can be leveraged by using CRISIS plan. Seeing every market fall it looks like a good buying opportunity, but when you are in the middle of war like Russo-Ukraine war it looks extremely risky! “
echoing the thoughts of Arun Kumar; Prateek Pant, Chief Business Officer, WhiteOak Capital, said, “We believe that macro alpha is merely a source of random risk, rather than any opportunity to add. To prevent such random risks from hijacking the team’s skill-based alpha, We maintain a balanced portfolio. Construction approach at all times, while consciously avoiding any macro bets such as market timing or sector rotation or such other top-down bets. It is not the case that such top-down bets always are wrong. It’s just that they are wrong as often as they are right, no different from a game of flipping a coin. If anything, in times of uncertainty, we focus our attention on maintaining a tight balance in the portfolio Let’s focus.”
how a balanced diversified mutual fund portfolio can be used to take advantage of a volatile equity market; Arun Kumar of FundsIndia said, “In case of a major downturn in the market, one should pre-determine a portion (Y) of one’s debt portfolio for equity exposure. Arund Kumar gave a plan which can be implemented in case of market fall:
1]If the Sensex falls by 20 per cent, then transfer 20 per cent of Y to equity.
2]If the BSE Sensex falls by about 30 per cent then 30 per cent of Y goes to equities.
3]If the Sensex declines by about 40 per cent, then transfer 40 per cent to equities.
4]If the Sensex falls by about 50 per cent, transfer the remaining portion from Y to Equity.
How to Change Equity Mutual Fund Portfolio after a major downturn in the markets; Sebi registered tax and investment expert Jitendra Solanki said, “Like debt allocation, one should allocate equal Y portion in large-cap stocks and transfer that portion from large-cap to small-cap in the same manner as Advised to move one’s money. From debt to equity. Such an exercise is advised because during market rebound, small-cap stocks move faster than mid-cap and large-cap stocks and hence small-cap mutual funds are expected to outperform mid-cap and large-cap funds after trend reversal in the near term.”
For a new investor, experts have advised such investors to invest the entire debt allocation immediately and invest 40 per cent of the funds allocated for equity funds. Then stagger the remaining 60 percent through a 3-month weekly Systematic Transfer Plan (ie STP).
Disclaimer: The views and recommendations above are those of individual analysts or personal finance companies, not Mint.
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