Skip to main content

Sectoral Funds are more Volatility

Best SIP Funds to Invest Online 


This is the kind of period in time that is an essential part of an investor's education. Equity fund investors across the board are learning a lesson in facing volatility with fortitude. At the same time, there are some false takeaways that you need to avoid. Probably, the worst lesson that can be learnt is that when the markets are down, some sectors still do well and the best approach is to identify the correct sectoral funds.


Right now, if you go to Value Research Online and look at the returns of different fund categories over various periods, you would come to one of two very different conclusions. You could either infer that it is a volatile period and as equity investors you just have to weather occasional bouts of unpredictability. Or, you could surmise that technology (and possibly FMCG) sector funds are doing well, and that if you had known this secret, you would have invested only in these funds.

Whenever a particular type of stock is doing well, a number of supposedly professional advisers decide to tell investors that this is where they should make their investments. Sellers start pushing funds that focus on that sector, seeing a clear opportunity if the trend continues.

For some time, the trend does hold. At this point, it investing in a diversified way seems like an inferior option. The difficult thing to understand is that this is actually happening almost constantly. The equity market, as a whole, is always a composite of sectors that are facing varying fortunes. Whether the markets are stable or volatile, rising or falling, one sector or the other is always certain to be doing better than average. This makes it highly likely that a diversified mutual fund portfolio will always look like a sub-optimal choice.

However, the law of averages inevitably asserts itself and the sector(s) that were doing well start performing below average, and their returns revert to the mean. Those who jumped on to the bandwagon late are left with the worst results. In fact, the math is generally even harsher. The reversion to mean often results in the formerly best sectors falling to the absolute bottom. This creates losses even when the rest of the market is booming. Former cheerleaders of the tech, infra and many other sectors have learnt this the hard way. However, if you see the excitement today, it becomes obvious that these lessons have been unlearned by many.


Does this mean that investors should avoid sectors that are doing well? That is also a recipe for low returns. In either case, investing on the basis of momentum is not the smart thing to do. What is the alternative?


The simple answer is that investors should let the investment manager of a diversified equity fund make the choice. After all, the main reason for investing in mutual funds is to get the services of an investment manager who does the research and makes the choices for you. If you have to track the markets yourself, what is the point of investing in mutual funds?

As I've discussed earlier in this column, volatility is a part and parcel of investing in any equity-based product. It is pointless to over-analyse a particular period of volatility. Today, it is interest rates and Trump's impending trade war, tomorrow it could be something else. It doesn't matter. Periodically, something or the other will inevitably come up. The best course of action is to identify this issue as the non-issue that it is.

 


SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich - Best ELSS Funds

For more information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further information on Top SIP Mutual Funds contact  Save Tax Get Rich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com

HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO

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     HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO will be open for subscription from 16th May 2014 to 30th May 2014. The key features of the scheme are as mentioned below:   Type of Scheme A Close Ended Capital Protection Oriented Income Scheme Benchmark Crisil MIP Blended Index Fund Manager Mr. Anil Bamboli , Mr. Vinay R Kulkarni & Mr. Rakesh Vyas New Fund Offer (NFO) Period 16 th May 2014 to 30 th May 2014. Minimum Application Amount Rs. 5000 and in multiples of Rs.10 thereafter Plans/ Options Offered Growth and Dividend Payout Facility Liquidity To be listed For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

How Tax Deducted at Source (TDS) works?

    THE tax season is here. And if you are an employee you can't blame your employer for deducting large chunks of money from your salary towards tax deducted at source ( TDS ), which he is legally obliged to do. Your bank will also deduct some percentage from your FD interest of Rs 10,000 or more towards TDS! So what is this TDS all about? How is it computed? Are there any changes this year? Read on... What is TDS? TDS reduces your taxable income and could even provide tax relief! The TDS collections account for 40 percent of the total taxes collected in the country. As the name suggests TDS is the amount of tax that is deducted at source in certain types of income . The TDS thus collected is deposited in the Government treasury within a specified time. How is it computed? Some of the types of income where TDS is applicable include salary, interest, rental fee, interest on securities, insurance commission, dividends from shares and UTI/Mutual Funds, commission and brokerage

How to PPF Account extension after maturity

A PPF account can be retained after maturity without making any further deposits. The balance will continue to earn interest till it is closed. Public provident fund or PPF remains one of the most popular savings options for the long term despite a gradual decline in interest rates over the years. PPF accounts have a maturity period of 15 years and they can be extended. If there is no fund requirement, financial planners say, PPF account holders should extend the account beyond 15 years. In terms of income tax implications, PPF accounts enjoy the benefit of EEE (exempt-exempt-exempt) status . Under Section 80C, contribution up to Rs 1.5 lakh in a financial year qualifies for income tax deduction. The interest earned and maturity proceeds are also tax free. What are your options when a PPF account matures? 1) A PPF account can be closed after the expiry of 15 financial years from the end of the year in which the account was opened. 2) The subscriber can retain his

Indian Railways Seat Availability and Train Fare Enquiry

Enter the PNR for your train booking to find its status. Your 10 Digit PNR : Are you looking for Indian Railways Seat Availability information for trains between any two Indian Railway stations? Well, here is a detailed guide to find out seat availability and train fare information for journey between any two stations by any train on any chosen journey date. The holiday season is around and Indian all around are busy making Indian Railways Reservation .But before making the reservation, they would like to check berth availability information and here is a detailed step by step guide to check seat availability and train fare. How to check Indian Railways seat availability · 1. Go to the Indian Railways Passenger Reservation Enquiry page to check seat availability by clicking here [link] · 2. Enter the first few characters of the Originating Station against Source Station Name. For eg., if the origination station is chennai, enter "Che" against Sou
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