The current economic scenario is gloomy and full of ups and downs:
- Equity Markets are highly volatile with last 5 year returns almost negligible.
- Bond yields have moved up drastically by almost 100 basis points compared to what they were 1 to 1.5 month back leading to Mark to Market losses on Mutual Funds and direct security holdings:
- High level of political instability.
- Policy paralysis and inaction by Government.
- Rupee depreciation to all time high of 61.43 vis a vis, the dollar.
The list can continue but some of the points mentioned above are sufficient to justify that we are economically going through a difficult phase. Of course measures are on by the Government and RBI to control the same, however this may take its own course and time to get things in order.
So what should a retail investor do to make money out of his Mutual Fund investments in the current scenario.
Simple Rules: 1.) Be disciplined
2.) Maintain horizons
3.) Do not Panic
Equity Exposure: Ideal for a minimum horizon of 7 to 10 years with Systematic Investment Plans being the ideal route. Diversify through Small and Mid Cap Funds and Large & Multi Cap Funds.
Debt: With 10 year G Secs hovering between 8.4 to 8.5% levels it is an excellent time to invest in Income funds with a Horizon of 1.5 to 2 years. Staggered approach is best. Buy in small amounts on every rise in G Sec Yields. Given the high yield scenario in Debt Market Investment in Income Funds make a strong sense at this point in time. Lumpsum investment strongly advised.
Hybrid Funds and ETF's: In case you have Liquidity in hand I will advise to take small exposure with a horizon of 3 to 5 years.
Liquid and Ultra Short Term Funds: Keep investing in case you have liquidity for short tenures. Best bets for short tenures. Horizon 1 day to 12 months
In case you have invested before this Liquidity Tightening carnage by RBI and the market fallback, I suggest you should hold on to these & Stay invested patiently till the time things get in line and your investment starts making money.
Remember horizon and discipline are the key.
- Equity Markets are highly volatile with last 5 year returns almost negligible.
- Bond yields have moved up drastically by almost 100 basis points compared to what they were 1 to 1.5 month back leading to Mark to Market losses on Mutual Funds and direct security holdings:
- High level of political instability.
- Policy paralysis and inaction by Government.
- Rupee depreciation to all time high of 61.43 vis a vis, the dollar.
The list can continue but some of the points mentioned above are sufficient to justify that we are economically going through a difficult phase. Of course measures are on by the Government and RBI to control the same, however this may take its own course and time to get things in order.
So what should a retail investor do to make money out of his Mutual Fund investments in the current scenario.
Simple Rules: 1.) Be disciplined
2.) Maintain horizons
3.) Do not Panic
Equity Exposure: Ideal for a minimum horizon of 7 to 10 years with Systematic Investment Plans being the ideal route. Diversify through Small and Mid Cap Funds and Large & Multi Cap Funds.
Debt: With 10 year G Secs hovering between 8.4 to 8.5% levels it is an excellent time to invest in Income funds with a Horizon of 1.5 to 2 years. Staggered approach is best. Buy in small amounts on every rise in G Sec Yields. Given the high yield scenario in Debt Market Investment in Income Funds make a strong sense at this point in time. Lumpsum investment strongly advised.
Hybrid Funds and ETF's: In case you have Liquidity in hand I will advise to take small exposure with a horizon of 3 to 5 years.
Liquid and Ultra Short Term Funds: Keep investing in case you have liquidity for short tenures. Best bets for short tenures. Horizon 1 day to 12 months
In case you have invested before this Liquidity Tightening carnage by RBI and the market fallback, I suggest you should hold on to these & Stay invested patiently till the time things get in line and your investment starts making money.
Remember horizon and discipline are the key.
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