Skip to main content

How to overcome Mutual Fund Risks

All mutual funds come with varying degrees of risks, but that doesn't mean you should not invest in them. The thumb rule of building wealth is: if you want returns, you have to take a bit of risk. The trick is to know the tricks to beat the risks.

Volatility
Equity mutual funds, or for that matter all equity investments, are prone to volatility. In 2016, the S&P BSE Sensex returned 1.95%. In 2017, it gave 28% returns. So far in 2018, Sensex has returned 4.8%. Mid-cap and small-cap indices-and by extension, the funds that invest in such companies-swing more wildly.


How to beat it: Two steps; if investing in equities, then avoid investing for the short run. Invest for the long term. By extending your investment tenure, you can cut out the effects of short-term volatility, which is typically severe. We recommend a minimum tenure of 5 years. The second step is to invest through a systematic investment plan (SIP). In this method, you buy less units when markets go up, but more units automatically, when markets go down.


Credit risk
When the underlying investments of debt funds fail to repay their interest and principal amounts-and worse, when their credit rating is downgraded-debt funds suffer. We have seen some such accidents in the past 3 years. The erstwhile JP Morgan Asset Management (India) Ltd suffered on account of its investments in Amtek Auto Ltd, and Taurus Asset Management Co. Ltd took a hit on some of its debt funds due to a credit ratings downgrade of one of its underlying investments.


The reality is that a credit rating downgrade (which leads to a fall in the net asset value of a mutual fund scheme) can happen swiftly, sometimes in a matter of months.


How to beat it: Earlier, it was tough for you to know which debt funds would take on credit risk, and which ones would avoid them. Now, the capital market regulator, Securities and Exchange Board of India (Sebi), has made it easier to identify such funds. Thanks to the ongoing scheme reclassification exercise that Sebi started in 2017, credit funds will now be called credit risk funds, and it has specified that such funds will invest at least 65% of their assets in securities rated AA and below. Corporate bond funds will no longer be allowed to take credit risks beyond a point; these shall invest at least 80% of assets in securities rated AA+ and above.


Uncertain Market
The future is uncertain, but we all have financial goals that must be met. What's worse is to see our portfolio grow over time, but one big bout of volatility in the final year (or the year in which we plan to withdraw) erasing a lifetime's worth of gains.


How to beat it: Practise asset allocation in the portfolio. Ascertain your risk profile; these days many financial advisers and distributors have sophisticated tools to capture this information. Based on your results, allocate your money in equity and debt instruments and then adhere to that allocation.


Review your risk profile and tolerance once in a year or two and keep tracking your asset allocation. That's another way to beat volatility.



SIPs are Best Investments as Stock Market s are move up and down. Volatile is your best friend in making Money and creating enormous Wealth, If you have patience and long term Investing orientation. Invest in Best SIP Mutual Funds and get good returns over a period of time. Know which are the 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

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.
Read more

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli
Read more

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis
Read more

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l
Read more

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in 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]
Read more
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