Diversification: Bet Against Volatility

The start of the month of April bought us a sense of déjà vu. Last year during the same period we saw the corona virus cases knocking on the door of India which led to a series of lockdowns that eventually triggered a sharp correction in the equity market. And now once again we are witnessing a sharp rise in cases in India and heightened volatility in the equity market. As an investor, you cannot avoid such volatility and this is part and parcel of the investment process. Nevertheless, you can minimise the impact of such volatility by diversifying your portfolio.
 

This diversification should be across asset classes and diversification needs to be done even within asset classes. This means that you should invest in equity, debt and commodity and within equity you can invest in large-cap, mid-cap and small cap funds. The exact weightage to different categories or asset classes will depend upon the individual investor’s risk appetite and the goal for which it has been assigned. This will help you to minimise your investment risk without sacrificing much on potential gain.

With so many options available today in each category, finalising about an individual fund becomes a bit of a complicated task for individual investors. Therefore, in this issue we are giving five recommendations from equity-dedicated mutual funds. You can invest in one or more funds depending upon your current portfolio. All the funds have been selected based on the rigorous selection criterion we have been employing for a while. As is said, the proof of the pudding is in the eating, in this issue we have analysed the performance of the funds that we have recommended in the last one year in a most objective way. This will help you to gain confidence in investing on our recommendations.

SHASHIKANT