Skip to main content

Equity v/s Mutual Funds

Go for equity or MF based on risk appetite

Some tips for investors in these volatile times when it is difficult to choose between equity investing and safer options



The domestic stock markets have seen a historic bull run over the last four years. From the beginning of 2008, the markets are in a correction phase due to weak investor sentiments in the local as well as global markets. We have witnessed unprecedented volatility in the markets in the last few months, especially over the last 4-5 months.



In fact, the domestic markets are among the most volatile markets in the world (volatility in the Indian stock markets is much higher than markets in developed economies like Dow Jones, NYSE, Nikkei, FTSE etc). There were many days when the Sensex recorded more than 1,000 points (above five percent) intra-day swings.



The rise and fall of share prices (market direction) depend of various market forces. In fact, the factors that affect stock markets have increased significantly over the last one decade due to globalization and technological advancements. Volatility is an important consideration while computing risk, and hence, the return expectations from investments.



These are some market forces that directly or indirectly drive the stock market volatility:



1) Global factors

The US economy data is showing signs of recession. Many analysts believe that the bottom of the US economic crisis is not yet reached. Since the US is the largest economy in the world, people are not clear about its impact on world economy and markets, especially countries which are mainly dependant on exports to the US.



Commodity prices are soaring across the board be it food grains (wheat, rice etc), precious metals (gold, silver etc) or crude oil. All major commodities are trading near all-time high prices. This is another sentiment dampener in the global markets.



In past correction phases, the Indian market had been the biggest out-performer compared to other Asian markets due to foreign funds coming in. But in the last couple of months, foreign institutional investors (FII) remained net sellers in the markets. We have thus seen a sharp fall in the markets. Momentum mid-cap and small-cap stocks were the most affected in the markets.



2) Domestic issues

Many local events saw the markets react quite strongly in the past. For example, the Government's proposal to write off Rs 60,000 crores in loans to farmers, and SEBI's proposal on restriction of further investments through the participatory note (PN) route had created panic in the stock markets.



Strategies for investors

The question is what should investors do? Invest in stocks, mutual funds or debt instruments (bank fixed deposits, public provident fund etc). The domestic markets and businesses should not be impacted much by the US sub-prime crisis and recession. The Indian economy is the second fastest growing one in the world today. India's real GDP grew at an average rate of more than eight percent over the last three years. According to the Reserve Bank if India's projection, the economy will grow by a healthy rate of around 8-8.5 percent this year too. Also, due to the slowdown globally, many foreign funds and companies are looking at investments in India.



These are some points investors can consider while taking investment decisions:

1) Hold stocks with potential

Investors invested in fundamentally good stocks (blue chip companies or mid-cap companies with good order books, track record and management) should remain invested. Although investor sentiments are negative in the market presently, with time, things will improve and fundamentally good scripts do not take much time to recover losses.



2) MF for the risk-averse

Risk-averse investors and investors who cannot keep a regular track of markets would be better off investing in mutual funds. These investors can look for diversification and creation of an investment basket of mutual funds itself.



3) Front runners for long-term investors

Long-term investors with higher risk appetite can look for investments in blue chip and fundamentally good stocks. There are many front runner stocks trading 30 to 50 percent lower their peak levels. Investors can identify some of these front runner stocks and build their investment basket. The key is to invest in small chunks at every market fall and accumulate stocks in your investment basket. An ideal diversified basket should contain 6-8 stocks from different business domains.

Popular posts from this blog

Surrender ULPPs

  ICICI Pru LifeTime and ICICI Pru Lifestage are Unit Linked Pension Plans. Such insurance linked retirement plans are neither good investments nor do they offer sufficient insurance cover. As you can see, these have turned out to be bad deals. In the Lifetime plan, the fund value is not even equal to the total premiums that you have paid and in the Lifestage plan your return is just about 6% which is quite low. The mortality charges are as per your age which is why they have increased. Moreover, once these plans matures, you will have to compulsorily opt for annuity (regular income) and the annuity rates are generally modest. Assuming these plans mature in the next one year, it will be wise to surrender the plan now and curb your future commitments.   Before you choose to buy a term plan, you have to consider a few points. You need to insure yourself, only during the time you are working and your family is financially dependent on you. At the age of 59, not all insurance companies w...

ICICI Pru Constant Maturity Gilt dividend

Invest ICICI Prudential Constant Maturity Gilt Fund Online ICICI Prudential Mutual Fund   has announced dividend under the following schemes: Scheme Dividend ( R /unit) ICICI Pru Constant Maturity Gilt-DQ 0.26543239 ICICI Pru Constant Maturity Gilt Direct-DQ 0.27171609 ICICI Pru Q Interval Plan I-D 0.10617296 ICICI Pru Q Interval Plan I Direct-D 0.10703967 ICICI Pru Q Interval Plan I Ret-D 0.10617296             The record date has been fixed as June 13, 2016.   ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) ...

SBI MAGNUM MIDCAP ONLINE

Invest SBI MAGNUM MIDCAP ONLINE   SBI MAGNUM MIDCAP fund didn't fare well in its initial years but, in recent years, has steadily improved its performance under the capable hands of its current fund manager. Although investing predominantly in mid-cap stocks, the average market capitalisation of its portfolio is lower than other category peers.   Although the stock selection approach is mostly bottom-up , the fund manager doesn't shy away from taking bold sector bets , as is reflected in its large exposure to the healthcare sector. She is equally adept at handling performance across market cycles--the fund has captured more of the upside during market upticks and contained the downside during downturns in a better manner than its peers.   Given its superior risk-reward equation, the fund is a worthy pick in its category.     ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing EL...

Sundaram Mutual Fund new plan Sundaram Fixed Term Plan CJ

Sundaram Mutual Fund has announced the launch of a new fund named as Sundaram Fixed Term Plan CJ. The new issue will be closed for subscription on January 30. --------------------------------------------- Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.   Invest Tax Saving Mutual Funds Online Tax Saving Mutual Funds Online These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)   Download Tax Saving Mutual Fund Application Forms from all AMCs Download Tax Saving Mutual Fund Applications   These Application Forms can be used for buying regular mutual funds also   Some of the best Tax Saving Mutual Funds available are: 1. HDFC TaxSaver 2. ICICI Prudential Tax Plan 3. DSP BlackRock Tax Saver Fund 4. Birla Sun Life Tax Relief '96 5. Reliance Tax Saver (ELSS) Fund 6. IDFC Tax Advantage (ELSS) Fund 7. SBI Magnum Tax Gain Scheme 1993 8. Sundaram Tax Saver   -...

Group Health Insurance

Buy Group Health Insurance Online   For Human Resources, the biggest challenge today is to decide whether medical benefits should be offered to employees or not, what type of plans should be offered, what will be the cost and how will the cost be split between employees and employer. Well, most of these are subjective and would depend on a lot of factors including company size, average employee salary, etc. However, this article will give you a fair idea on how you should go about deciding these factors: 1. Why offer group health insurance benefit to employees : Studies have proved that retention rates among employers offering GHI are much higher than the ones who are not offering. Moreover, the cost of providing this benefit as a percentage of salary is very low as compared to the perceived value. As an example, say if average salary of an employee in your organization is 4 LPA. If you decide to offer a health insurance benefit to him for a Sum insured of ...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now