The Russian-Ukrainian conflict continued to dominate Indian markets on Monday as domestic stocks fell more than 2% and the rupiah hit its all-time low, reacting to soaring crude oil prices.
It’s a matter of market timing when it comes to buying mutual funds. Usually, mutual fund investors get carried away when they see the market crash. We look at funds that are likely to perform better in the event of a market correction.
Despite the deep correction, experts are of the view that investors should not dive headfirst and should largely stick with large-cap safe bets.
“We continue to be more focused on the large cap strategy. So large, large and mid cap and flexible cap funds would be a better strategy at this stage,” said Harshad Chetanwala, registered investment adviser with Sebi and co-founder of MyWealthGrowth.
Chetanwala tells investors to go slow on small caps, especially via lump sums.
The expert suggests a mix of active and passive strategies, where 20-25% of allocation goes to passive funds and the rest to active funds. “In the current market conditions where equities may correct a bit, active fund managers may offer better investment opportunities. When it comes to liabilities, it’s purely the Nifty or Sensex index,” a- he declared.
Due to the recent uncertainty related to the Russia-Ukraine crisis and likely interest rate hikes by the US Federal Reserve, equities have taken a heavy hit over the past few months.
Gold was a major beneficiary, as data available with ValueResearchOnline shows bullion funds generated over 15% return on average, compared to 9% return for the large cap category on an annual basis. .
So what should mutual fund investors’ strategy be when it comes to precious metals?
“We suggested a gold lump sum about five to six weeks ago when there was a technical breakout. But we don’t see gold going from $2,000 to $2,500. I think once this all gets sorted out (the Russian-Ukrainian crisis) you’ll see gold come back to levels of $1,700-$1,800,” said New Delhi-based portfolio manager Amit Kumar Gupta. at Adroit Financial Services Pvt. Ltd, a portfolio management company registered with Sebi. The expert suggests that investors can have a 5-10% allocation in gold.
As far as Systematic Investment Plans (SIPs) or lump sums go, what is the best way forward at this point?
“If you have a surplus today, you put 10-15% of the investments as a lump sum into your existing portfolio if the funds are doing well, but invest gradually and don’t put all the money in at once. We have yet to see how the Fed rate impact plays out,” Chetanwala said.
In terms of global diversification, Chetanwala suggests having around 10% of overall portfolio in international equities.
“International markets have fallen much more than India. Unfortunately, Indians are losing this opportunity as most international funds have restrictions on international investments. Yet no significant one-time investment at this stage in India or abroad. Incremental investments can work better,” he said.
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