Make Your Mutual Fund Portfolio Ready For 2020

Make Your Mutual Fund Portfolio Ready For 2020


Hemant Rustagi
Chief Executive Officer, Wiseinvest Advisors 


The year 2019 turned out to be a mixed bag for mutual fund investors. Although the benchmark indices like Nifty and Sensex touched new all-time highs, mid and small-cap segments of the market underperformed their large-cap counterparts. The extreme polarisation in the market resulted in a wide variance in performance of funds depending upon the level of exposure to different market caps as well as the different investment philosophies and strategies. The encouraging part was that investors following disciplined approach of investing through SIP continued their process despite disappointing returns from some of the funds in their portfolios.

Clearly, these are challenging times for investors. Considering the equity as an asset class which has a tendency of testing patience and perseverance of investors from time to time, the level of success that one can achieve depends upon how he or she handles such difficult periods. The right way to ensure success in the long-run is to keep focus on investment goals and continue the investment process through defined time horizons.

The start of a new year can be a good time to take stock of your mutual fund portfolio as that helps in reaffirming faith in one’s investment strategy and philosophy. Here is what you need to do to keep your investments on track in 2020.

 Keep your faith in equity as an asset class. If polarisation in the market made some of your quality funds underperform in 2019, you should continue to remain invested as the market is likely to be more broad-based in 2020, than it was in 2019. However, it is always a good idea to have a mix of well-diversified and focussed funds in the portfolio.

 During the first 8-9 months of 2019, Exchange-traded Funds (ETFs) outperformed actively managed funds and that made investors wonder whether it makes sense to invest in those funds. However, as the market became broad-based in the last 3 months, actively managed funds started performing better. In a market like ours’, there is an ample scope for fund managers to generate alpha for you by picking quality stocks outside the major indices. Hence, actively managed funds should remain the core of your portfolio in 2020.

 Although the performance of mid and small-cap funds disappointed investors in 2019, it is important not to reduce exposure to both these segments haphazardly as they have the potential to improve the overall portfolio returns in the long-run. There is no doubt that the exposure to these segments should be in-line with your risk profile and time horizon. If you have continued investing in these funds through the challenging times in 2019, you would benefit once the market stabilises and becomes broad-based.

 Managing allocation to the three segments of the market, that is, large, mid and small-caps can be quite tricky for investors. If you face this challenge, investing in multi-cap funds can be a good strategy. There are a number of funds in this category that are true to the label and manage allocation to different segments of the market quite effectively.

 Continuing investment in a disciplined manner through difficult period helps you in turning volatility to your advantage. If you have been investing in equity and equity-oriented funds through SIP without a defined time horizon, you must do so now as that will not only allow you to tackle volatility more efficiently but also help you benefit from the true potential of this wonderful asset class.

 ELSS, as a category, proved its worth as an effective option to save taxes under Section 80 C even in a challenging year like 2019. If you have not yet included ELSS in your tax saving portfolio, you must do so in 2020. Remember, ELSS can be the best option if you intend to begin investing in equity funds. In fact, aligning investment into ELSS to your long-term goals can contribute significantly to your wealth creation process over the longer-term.

 International funds, especially those investing in the US, Asian and emerging markets performed quite well in 2019 and set an example for some global diversification in the portfolio. Those investors, who are experienced and have built a reasonably large portfolio, should consider investing 5-10 per cent in international funds.

Rate this article:
No rating
Comments are only visible to subscribers.

DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

Corresponding SEBI regional/local office address- SEBI Bhavan BKC, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra.
Tel: +91-22-26449000 / 40459000 | Fax : +91-22-26449019-22 / 40459019-22 | E-mail : sebi@sebi.gov.in | Toll Free Investor Helpline: 1800 22 7575 | SEBI SCORES | SMARTODR