Equity investors should not get panicky during high market volatility and market corrections. It is a normal phenomenon, which usually happens at regular intervals. Such corrections in structural bull markets are good as it helps in removing the froth from the stock market. Also, these volatile situations create an opportunity to buy a number of stocks at a cheaper price. Those who are invested in equity mutual funds should remain invested for a long term.
What sort of funds should you get into? Should you be aggressive and get into mid-caps or should you stick to the safety of large-caps?
Investors in the current market scenario can consider equity investments whether it can be a large-cap or a mid-cap that aims to generate income by investing in blue-chip companies or emerging companies to get higher returns. But, you should ideally go for capital appreciation through moderate exposure to equity, that is through balanced equity funds option during certain market conditions. While constructing a portfolio, one should invest 40% in large-cap funds, 30% in multi-cap funds and roughly about 20% in mid-cap/small-cap funds even if there is an uncertainty in the market.
Tips for investors who want to invest in mid-cap and small-cap…
Always choose to have a diversified portfolio in the mid-cap segment. This reduces the market risk to an extent. Assuming, if a mid-cap portfolio has 50 to 60 number of emerging company's stocks then in such case, not all stocks will fall during volatility or correction phase. If 30 stocks witness a fall then the other 30 may rise too. However, this can only happen if you are routing your money through equity mutual funds.
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