Skip to main content

Dynamic Allocation Funds

Invest Dynamic Allocation Funds Online
 
 
 
 
Markets are down and portfolios are bleeding. Experts tell you how to make the most of this bearishness.
 
Though there will be short to medium term pain, a bear market is also an opportunity for long term investors. A closer look at the previous eight-year cycles shows that there have been real bull markets and fake bull markets. While the bull market till 1992 generated compounded annual returns of 37%, the next eight years generated a paltry 4% per year. Similarly, the bull market till 2008 generated 17% CAGR, but the next bull market till 2015 that took the Sensex to 30,000 plus levels have generated only 5% CAGR. Most experts feel that the next bull market is going to be a really big one. "Somewhere during the stress, the next bull market will start and the next leg of the bull market is going to be very powerful.

However, this is not the time to buy because the bottom formation of the next bull market is going to take time. Don't expect a V shaped recovery from current levels.The recovery will be U shaped, that too with an extended bottom. Historically, the broader market valuation also comes down significantly before the next bull phase starts. The Sensex PE has fallen to its 20-year average (see chart) so there is scope for a further decline.

BE SELECTIVE IN STOCK PICKS

Investors should not buy a stock just because it has fallen too much. Experts say that investors should maintain a portfolio of good quality stocks. Start accumulating stocks where the results are looking strong or where the Government policy impetus is likely to drive growth. On his radar are large-cap IT stocks and select road construction companies.

SWITCH TO LARGE-CAPS

Until recently, mid-cap stocks were zooming even as large-cap stocks languished. This was because foreign investors, who mostly invest in frontline stocks, were selling these as part of a broader emerging market strategy. Meanwhile domestic mutual funds, armed with continuing inflows from local investors to their mid-cap schemes, were pumping this money into a basket of mid-cap stocks. Traditionally, large-cap stocks trade at premium to midcaps, but the mid-cap valuation went above the large cap in the recent past (see chart).

Though the recent carnage in mid caps has brought their valuation below the large caps, experts reckon that the large-cap universe still offers a good investing opportunity. Further buying into mid-caps is not advisable. I strongly advocate investors stick to large-cap stocks as the risk-reward payoff is skewed toward this segment, also feels large-caps are the place to be as these are significantly undervalued relative to mid-cap stocks. He suggests large-cap IT stocks as these are cash rich, priced attractively and likely to benefit from the rupee depreciation.

Similarly, mutual fund investors should also go with large cap funds. But those holding mid-cap oriented funds should remain invested rather than switching to a different category. Mid-cap stocks do tend to be more volatile compared to large-caps. But if you invested in this category on the premise that India's recovery is likely to play out over a 3-5 year period, there is no reason to change your mind now.

BE READY FOR SECTOR ROTATION

The top performing sectors change in every bull market. It was banks and commodities that led the 1992 and 2008 rallies. Similarly, the FMCG, pharma and IT sectors were running the show in the 2000 and 2015 rallies. Investors should look at beaten down sectors now and enter when stock prices reach reasonable levels. There is more pain in store for commodities, so leave them alone for the time being. However, PSU banks are a good buying option now. The price to book ratio of some PSU banks has fallen to 0.3-0.4 times. Investors with a 1-2 year investing horizon can consider buying them.

INSURE YOUR PORTFOLIO

Since the market is expected to be volatile in 2016, investors also need to insure their portfolios. Investors with large and well diversified portfolio should consider hedging their portfolio with Nifty out-of-themoney put options to protect their existing holdings from further erosion. A similar strategy is possible for investors who are planning to get in at current level also.Even if you identify a very good stock, experts advise you not to jump in now without any protection. If you want to buy a stock, you should buy a call option which will give you the upside while the downside is protected.

DYNAMIC ALLOCATION APPROACH

Investors also need to manage their portfolio more dynamically. Small investors may not have the time or the ability to do this. Their best option are the schemes that follow a dynamic asset allocation. They have a higher allocation to debt when markets are at highs and get into equities when markets are undervalued. Due to its lower volatility, this category is best suited for risk averse investors. For retail investors, the easiest way to use the asset allocation mechanism is through dynamic asset allocation funds. These funds are structured to invest in equities when markets are cheap and book profits when markets are rising.

BE A DISCIPLINED INVESTOR

All these strategies need active participation. Small investors who are not able to do so should continue with their SIPs to make the most out of the upcoming market volatility. This may seem like an oft-repeated dictum, but experts insist that the right approach at this time is to maintain one's asset allocation. It is a time-tested principle of investing which has proven its value over multiple market cycles. Simply put, it helps you average out purchase price over a period of time while capturing more units when prices are low and less when prices are high. When the market bounces back, the units bought at lower levels provide a huge boost to the overall return. This is perhaps the best time to start a SIP if you have not already done so as your instalments will begin when pessimism is about to peak out. Stagger your investments over the next 3-6 months through a mix of large and midcap funds, preferably in the ratio of 70-30% depending on your risk profile

-----------------------------------------------
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 Saving 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) Fund

9. Religare Tax Plan

10. Birla Sun Life Tax Plan

Invest in Best Performing 2016 Tax Saver Mutual Funds Online

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

-----------------------------------------------

Popular posts from this blog

ICICI Prudential Dynamic Plan Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   ICICI Prudential Dynamic Plan             Invest Online This fund does remarkably well during falling markets, but fails to show the same prowess during a rising market. The fund sticks to its mandate to adapt to the dynamic nature of the market by shuttling between debt and equity. It takes aggressive asset calls in equity when the market surges by investing in quality mid-cap stocks. At the same time, it adopts a defensive strategy by investing in debt and cash when markets get overvalued, making it a good long-term choice.     For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call     Leave a missed Call on 94 8300 8300   Leave your comment with mail ID and we will ...

Feeder funds are the cheapest way to invest in gold

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)   There are four ways to put your money in gold — buying physical gold/jewellery , putting money in gold exchange-traded funds ( ETFs ), investing in a gold savings fund and going for the National Spot Exchange's e-gold. Now, some gold ETFs and e-gold even allow taking physical delivery of gold at the end of investment tenure. That might sound good if you wish to possess physical gold. But, given the firm price of gold today (almost ~31,000 per 10g), it is important that gold is bought through acost-effective avenue. Reason: Investing comes at a price. Add to that, India's gold buying is expected to decline in 2012 and 2013, according to the latest World Gold Council ( WGC )report. WGC Director Vipin Sharma feels gold imports may drop to 800 tonnes from 967 tonnes last year. And the mix between the jeweller...

Lump Sum or SIP?

Invest Mutual Fund Online     You have a lump sum in hand and you wish to invest in equity funds. However, you have heard a lot of talk about investing in equity funds through Systematic Investment Plans (SIPs) because they help average costs, ensure you do not ill-time the market, and help you invest in small sums, besides giving you many other advantages. So, should you invest the money you have in hand in one go, or let it remain in your bank account and then do an SIP? There is no harm in investing a lump sum amount. For all you know, compounding, over the long term, could work better with lump sum. However, make sure you fulfill all of these three criteria if you want to invest in one go. Else, SIP is the way to go. #1: You invest for the long term According to past data, ideally, if you have a time frame of 12 years or more, you can consider lump sum investing (provided you satisfy the other two conditions that follow). So, what is the sanctity behind 12 years? Is it because only...

Mutual Fund Review: Reliance Regular Savings Balanced

Reliance Regular Savings Balanced fund has shown great resilience during market crash After a shaky start, this fund has established itself as a strong contender in this space. In the past three years it has ridden the market well by not only delivering during the market run-ups but also displaying resilience during the crash. In 2008, it witnessed the second lowest fall among its category and last year it was amongst the top three performers with a return of 76 per cent (category average: 61%).   The poor underperformance in 2006 can well be credited to the low equity allocation of the fund, which stood at just over 10 per cent for only four months that year. Though the fund has the leeway to go up to 75 per cent in equity, it has never touched that limit. In fact, it has exceeded 70 per cent in just five months in its entire history. During the crash of 2008, the fund managers had no problem going right down to 54 per cent (equity exposure). Fund managers Omprakash Kukian and A...

Why credit history is critical?

Will you need a loan to buy a car or a house? Do you know why some people get their loans sanctioned quickly without any hassle, whereas others find that their approval is delayed or their application is rejected? If you want a loan, you will need to work to build a solid credit history because this can have a bearing on the ease with which you get loans. Read on to learn more about what is a credit history and how to build a good credit score. What is a credit history? Your credit history is a way of tracking your credit behaviour and habits — basically it shows how disciplined and regular you are when it comes to repaying your dues on loans that you have taken. It will show a complete record of your past borrowing and repayment record including details about any late payments or if you have defaulted on a loan. This track record is readily accessible to lenders and is used by them to when reviewing your loan application. Borrowers who have historically had a bad record of managing...
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