If one has to point out the single most important factor that is currently a key concern for equity markets the world over, it is volatility. The Indian equity market is no exception to this. The Sensex swings a few hundred points quite effortlessly, and in the process, there are many investors who have seen their wealth being eroded. Until a few years back, it was more of the local factors that were the prime movers of the equity market.
However, this has changed now, and there is a confluence of many domestic and international factors which is adding to the daily volatility of the market. Globally, equity markets are increasingly becoming more correlated, and any disturbance in one part of the world like Greece or Iran impacts our own market too. In these conditions, it becomes very difficult for an investor to decipher the ever-changing economic situation, judge its effect on the equity market and take investment decisions accordingly.
Therefore, it is wise to entrust your money to someone whose job is to read between the lines of these fluctuating economic cycles and the investment climate, and thereby make profitable and safe investments on your behalf. Mutual funds are an investment avenue where you can park your funds with the expertise and market knowledge that fund managers bring to the table, in exchange of a fee. It is not that these mutual funds are immune to any of the swings in the equity market, but they are better prepared to tackle the situation than a common investor who does it all by himself or herself. These are professionals whose job is to man-age money, and who are supposed to take more informed decisions that help in providing potentially better returns.
Making investments through mutual funds also helps one to choose a fund scheme according to one’s needs, and offers much-needed diversification to one’s portfolio. Therefore, investors can make their own portfolio depending upon their specific needs and risk appetite. If an individual is interested in capital appreciation and has a good risk appetite, he/she can invest a major chunk of investible funds (as much as 70 per cent) in growth schemes, 20 per cent in balanced schemes and the rest in income funds. What is important to note is that an investor with a very low investible corpus can also achieve diversification in his/her portfolio by going the mutual fund way. Moreover, the well-regulated market for mutual funds adds an added level of comfort for an investor.
Another significant point while considering mutual funds as an investment avenue is that of taxation. There is no tax to be paid on dividends received from equity mutual funds. However, normal capital gains tax is applicable once you sell your mutual fund units. In case of a debt fund, you have to pay 12.87 per cent tax on the entire dividend received.
Having said all of this, there are almost 900 mutual fund schemes to choose from, making the task of selecting the right schemes difficult for retail investors. This is where we come into play. We have selected schemes from the equity diversified segment, as they are the ones that are supposed to give more stable returns in volatile conditions such as the current one.
These funds are selected on the basis of their excellent past performance, giving more weightage to the long-term performance (i.e. three-year returns), and at the same time, giving due consideration to the risks taken by fund managers to produce such returns. What this means is that the risk-adjusted returns were also one of the criteria for fund selection. In addition to this, factors like the size of the fund and the fund manager’s performance across schemes were also looked into before arriving at the final list.
Presented ahead are seven equity diversified mutual fund schemes that, we believe, would add value to your portfolio going forward, without put-ting you through those sleepless nights you spend worrying about where the market would end tomorrow.
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