SIP Vs. Lumpsum: What’s the Best Mutual Fund Strategy in a Volatile Market?
As the stock market sees a rise and fall, mutual fund investors remain in dilemma over how to handle their investments. On one side is the apprehension of a probable market crash as the prices are already too high; on the other side, the good run of the market is making it difficult for investors to make their choices.
Nowadays, amidst the economic uncertainty that clouds the investors’ perspective, opting for the right investment mix becomes hard to make decisions on for good returns with minimal loss. Indeed, this is the best way to decide how much one will invest in every type of investment or rather asset allocation, dictated by how much risk they are able and willing to take, their investment horizon, and the financial goals they seek to realize.
Experts view that asset allocation should not be based on what is taking place currently in the market. It should be based on one’s personal factors such as risk tolerance, time period of investment, and need for money. In this way, the investors will not be highly bothered by the short-run changes in the market.
Recently, the Nifty50 index had surged past 25,000 in early August, fell to 24,000, and later rebounded to close at 24,852 towards the end of the month.
Which Investments are Best in a Volatile Market?
It will be a good strategy to diversify investments across various classes of assets as per your risk appetite. In case you have time on your side, you can consider investing money in equity mutual funds or stocks. Indian economic growth seems pretty promising, and it has a reflecting stock market. However, some of the growth is already portrayed in the stock prices, but the investment cycle seems all set to continue, more so with recent company earnings meeting expectations.
There are numerous equity mutual fund variants, of which sectoral and thematic funds are a couple. In August, funds falling under the category of chosen sectors, such as pharma and healthcare, showed the best returns at around 6.33%. Then, small-cap funds generated around 2.33%, while multi-cap and large & mid-cap funds gave about 2.19% and 2.02%, respectively. The returns offered by Flexi-cap were about 1.71%, while mid-cap and large-cap generated 1.64% and 1.20%, respectively.
What Mutual Fund Should You Invest in Now?
Experts suggest that long-term equity investors looking to build wealth can still focus on large-cap schemes such as Large Cap, Flexi Cap, Multi Cap, and Large and Mid Cap funds. In the current scenario, such funds reflect upon quality investing rather than speculating on facts.
So far this year, infrastructure funds have given up to 48.33% returns. A defence sector fund delivered 44.35% return, while another focussed fund returned 37.33%. A mid-cap fund delivered 33.15%, while another large mid-cap fund delivered 32.45%. The biggest small-cap fund delivered a 29.76% return in the same period.
SIP or Lumpsum: Which is Better?
Experts have thus suggested staggered investing, especially for long-term goals when it comes to investing through SIP or a lump-sum amount. In other words, invest a bit at a time through SIP or via an STP to reduce the impact of market ups and downs.
Risk tolerance, length of time the money can be tied up and personal financial goals can be considered beforehand. With a definite plan, an investor will surely know his or her way around the ups and downs of the markets toward growth in his or her wealth in the long run.
