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

Franklin India High Growth Companies Fund

Franklin India High Growth Companies Fund Online One of the key developments that the Street is keenly waiting for is a cut in interest rates by Reserve Bank of India . With demand rising gradually, a rate cut is expected to boost earnings growth for companies. In such a situation, schemes which invest in high growth companies are best suited, especially when seen from a long-term perspective. One such scheme is Franklin India High Growth Companies Fund. Fund managers Anand Radhakrishnan, Roshi Jain and Srikesh Nair strictly follow valuation parameters when it comes to choosing stocks.Valuation parameters, such as enterprise value, price-to-earnings growth ratio, forward price-to-sales ratio and discounted earnings per share, play a critical role in selecting companies for investments. Taking into account these parameters, the fund managers invest in companies which are poised for high growth in their respective sectors. This approach has been in favour of the scheme and it has perform...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- 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. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Avoid NFOs

  Don't get taken in by the flurry of new fund offers. You will be better off sticking to the tried and tested schemes.   For the past one year, to cash in on the bull run in equities, mutual fund houses have gone on a new fund offer (NFO) overdrive. But experts are unanimous in their advice: avoid NFOs . While past performance is not an indicator of how a fund will fare in the future, it does tell the investor how skilful the fund manager is. This crucial information is missing in an NFO. Not only is there no track record to judge an NFO by, many NFOs are similar to funds that already exist. If the new fund is similar to existing funds, you are better off investing in the latter. Around 67% of the new launches in 2014 were closed-end products. Investing in the NFO of a closed-end fund is doubly risky. In case the fund's performance is lacklustre, a closed-end fund does not allow you to exit. Even though closed-end funds are listed on the stock...

Mutual Fund Exit Load Changes

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 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...

L&T Income Opportunities Fund dividend

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 L&T Income Opportunities Fund declares L&T Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( R /unit) L&T Gilt Investment-DQ 0.3 L&T Gilt Investment Direct-DQ 0.3 L&T Income Opportunities Ret-DQ 0.31 L&T MIP-Wealth Builder-DQ 0.3 L&T MIP-Wealth Builder Direct-DQ 0.3 L&T MIP-DQ 0.3 L&T MIP Direct-DQ 0.3 L&T Short Term Opp-DQ 0.26 L&T Short Term Opp Di...
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