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Economic Times
5 days ago
- Business
- Economic Times
Volatile Markets and SIPs: What should mutual fund investors do?
Since the April low, 19 out of 21 equity mutual fund categories delivered double-digit average returns, while pharma and consumption funds posted single-digit gains. Amid a volatile market, many investors are questioning whether they should continue their Systematic Investment Plans (SIPs) or pause until stability returns. However, market experts recommend continuing SIPs, citing reasons such as attractive valuations, lower average purchase prices, the benefits of habit formation, the impossibility of timing the market, and the long-term advantages of compounding. 'When equity markets fall, valuations also fall, making investments at a lower price more attractive; therefore, when the market falls, it is the best time to continue SIP, discontinuing SIPs can hamper the investors' ability to save and invest, and take away the discipline of long term investing, the investor thinks that he/she can enter again or restart at lower prices, but it's not always possible, and lastly the whole idea of a SIP is to do away with market timing speculation and stopping a SIP can disrupt the process of compounding,' Vishal Dhawan, CEO, Plan Ahead Wealth Advisors, a wealth management firm in Mumbai told ETMutualFunds. Also Read | Balanced advantage vs. Multi Asset Allocation Mutual Funds: Which should investors choose? He added that since equity investing is aimed at long-term compounding benefits, one can start SIPs at any time. However, while markets have recovered from their recent lows, periods of market decline typically lead to more attractive valuations. Investing more during such times—when markets are not at their peak—increases the probability of achieving superior long-term returns. 'So, depending on cash flow surpluses, there is a need to try to have a significant portion of the cash flow surpluses going through SIPs ideally.'Another expert cited studies which show that investors' returns and market returns are not the same. This is because an investor is either entering or exiting the market at the wrong time. To achieve their goals, one needs to give time and be patient. That's what SIPs do: help you achieve your goals in a disciplined manner over periods of time. 'In the journey, there will always be short-term hiccups, but staying focused on your investments is the only way to achieve your goals,' said Manish Mehta, Joint President & National Head –Sales, Digital Business & Marketing, Kotak Mutual Fund, shared with ETMutualFunds. So far in the current calendar year, the benchmark indices — BSE Sensex and Nifty50 — have gained 4.23% and 4.67%, respectively. Over the past three months, they have risen by 11.27% and 11.86%, respectively, while over the last nine months, they have declined by 1.11% and 1.92%, May, Nifty50 breached the 25,000 mark for three days. On May 26, Nifty 50 closed up by nearly 13% from April's low level, and as the benchmark index scales up, many market experts recommend that investors continue with their SIPs, whereas they should stay cautious while doing lump-sum investments and should try to stagger their investments. Also Read | New investors' dilemma: Is flexi cap fund alone sufficient to deploy Rs 10 lakh for meeting goals As an addition to this, Dhawan recommends that currently, valuations are above their long-term averages, especially in the case of mid and small caps, and thus it is preferred to invest through SIPs/STPs. 'However, the ongoing volatility driven by global trade wars and cross-border tensions could present sudden opportunities. Market corrections can be sharp, so it's wise to be prepared for lump-sum investing, besides continuing with SIPs,' he further shared with ETMutualFunds. On the other hand, Mehta recommends that STP is suited when one has some money available for lumpsum investment but varies with market fluctuations and in this case one can park the money in a fixed income scheme and do a STP with a duration of their choice plus if an investor plans to invest out of a regular income stream then SIP fits the requirement where in a disciplined manner one can regularly keep investing. ETMutualFunds looked at the performance of equity mutual fund categories since the April low and found that out of 21 categories, 19 offered double-digit average returns, and two, pharma and consumption-based funds, gave single-digit returns in the same time frameSince April 7, the Auto sector-based funds offered an average return of 19.13%. Technology-based funds gave a 17.44% average return in the same period. International funds gave 16.83% and infrastructure funds delivered 15.95% average return in the same and small-cap funds gave 15.86% and 16.42% respectively since April's low level. Contra and large-cap funds were last in the list of double-digit gainers. The categories gave 11.92% and 11.03% respectively in the mentioned period. As the categories gain since April's low and the market being still volatile, Mehta recommends that long term wealth creation can happen through regular investments in equity oriented schemes to support which there is enough historical data to demonstrate long term wealth creation through equity schemes and since SIPs are recommended over longer time horizons, investments in multicap / flexicap / large and midcap kind of schemes. Also Read | MF Tracker: Will this April midcap star sustain its momentum? According to a release by Motilal Oswal Private Wealth, large-cap valuations are now around their 10-year average, while mid- and small-caps still trade at a premium, though select opportunities exist. Dhawan further shared with ETMutualFunds that currently, large-cap stocks offer attractive valuations compared to small and mid-caps, which makes them a smart starting point for SIPs (Systematic Investment Plans), especially in funds that are currently overweight in the large-cap category, and these funds are also safer for new adds that different assets perform well in different timeframes; therefore, your portfolio should include multi-asset funds. Geographical diversification is crucial for any robust portfolio, so consider adding global or international funds to reduce reliance on the domestic market and gain exposure to different economies and currencies. Additionally, under debt funds, one can consider short-term funds for short-term goals and long-term funds to take duration exposure, and for those in higher tax brackets, equity savings and arbitrage funds offer good options for short-term fund parking, he informed should always choose a scheme based on risk appetite, investment horizon, and goals. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ alongwith your age, risk profile, and Twitter handle.
Time of India
19-05-2025
- Business
- Time of India
Sensex @82,300: Should mutual fund investors alter their investment strategy?
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Remove Ads With the benchmark index - Sensex , reaching the 82,300 mark on Friday, market experts note that though this is a remarkable milestone, the mutual fund investors should stay invested , stick to the asset allocation, and a large cap tilted portfolio will be a good approach.'We recommend investors remain invested, data suggests timing of markets is not possible, stick to your asset allocation, and considering how expensive mid-caps and small caps are, we recommend a large-cap tilted portfolio, recommended Vishal Dhawan, CEO, Plan Ahead Wealth Advisors, a wealth management firm in explains that often, investors relate the price of an index or stock to conclude whether the instrument is overvalued or undervalued but in reality, the P/E ratio signifies if the index is trading at under/over /fair currently Nifty 50 1-year forward PE ratio suggests a PE of 22x compared to a historical long-term average of 19.5x which suggests that the index is slightly above its historical average, but is not at alarming levels where one should be Read | Flexi Cap vs. Multi Asset Allocation Mutual Funds: Which one is best for you? The benchmark index is still 4% down from its all-time high level of 85,978.25 recorded on September 27, 2024. Sensex on Friday touched a mark of 82,514 and dropped marginally by 0.22% to close at 82,330 market expert mentions that while the Sensex crossing 80,000 is a remarkable milestone, mutual fund investors should view this through a long-term lens and the goal of investing is wealth creation over time, not reacting to short-term highs.'If an investor has immediate fund requirements in the next 3–6 months, it may make sense to book partial profits. But for most investors, it's best to stay invested, maintain discipline, and avoid making hasty decisions based on market levels. Remember, building wealth requires patience, and rushing to book gains could mean missing out on future upside,' recommended Shruti Jain, Chief Strategy Officer, Arihant Capital the BSE Sensex scales up, many existing mutual fund investors look for better investment options and are willing to start new investments, but are confused whether to postpone their fresh investments or move further to do the investments in this market there are many first-time investors who are willing to allocate in the categories which offer high returns, have low or high risk, and offer tax recommends that we are currently in a volatile environment, it's better to deploy to funds where the fund manager can have flexibility and flexi cap, value, and focused – are a few categories one can help the new investors, he adds that, 'If you are a new investor, the past performance of mutual funds might result in having unrealised returns, including continuation of such returns. If you are a new investor, it would be prudent to start with Hybrid Instruments. One can consider Balanced advantage or Multi-Asset allocation funds – these will give the fund manager flexibility to invest across asset classes as pockets of markets are still in an expensive zone and this would be a good start for a new investor.'There is no universal solution as the right approach varies from investor to investor, Jain advocates. 'There is no one-size-fits-all answer—it depends on individual goals and risk tolerance," she recommending fresh investments at record highs, Jain said that investors may consider a diversified approach, leaning toward large-cap, flexi-cap, and hybrid funds and as mid- and small-cap funds have underperformed recently, and contrarian sectors or infrastructure-themed funds could be worth exploring selectively. 'Investing through Systematic Investment Plans (SIPs) at this stage can also help mitigate timing risk and provide rupee cost averaging benefits,' she Sensex in the last one month has gained 6.86% whereas in three months it gained 8.41%. In the current calendar year so far, the index has gone up by 5.36% and in the last one year , it gained in double-digits. It surged 11.76% in the past one the correct approach in this current market scenario, Dhawan recommends that one should continue investment with a long-term investor of at least 7-10 years and for lumpsum investment, one can consider large-cap tilted funds or index funds, or for factor-focused, one can consider quality or low volatility focused funds. He adds that, 'Do note that a 5-year SIP effectively translates to an average holding period of only 2.5 years because the 1st SIP has completed 60 months, whereas the last SIP has completed only a few days.'Jain firmly says that in the current market scenario SIPs should absolutely continue, regardless of market levels as the idea behind SIPs is to navigate market volatility and maintain discipline and over the long term, SIPs offer the benefits of timing diversification and portfolio rebalancing.'For lump sum investments, it would be prudent to stagger the allocation—either through Systematic Transfer Plans (STPs) or by parking funds in short-term debt funds initially and deploying gradually. Evaluate fund performance and align with your goals before making large lump sum bets,' the Chief Strategy Officer at Arihant Capital Markets important thing to consider while making the investment decision is can hybrid mutual funds offer a safer route at current index levels or should mutual fund investors consider increasing exposure to debt or gold funds at market peaks?Hybrid funds are mutual funds that invest in a mix of different asset classes, primarily equity and debt, but also include gold and real estate in some cases. It's also an easy option for those who want to invest in multiple asset classes for diversification whereas gold is considered a hedge against inflation and with global economic conditions remaining uncertain, gold is expected to retain its appeal as a hedge against market experts consider hybrid mutual funds and debt funds as a good option for investment in the elevated market levels, while recommend to limit the exposure in asserted that hybrid mutual funds (balanced or dynamic asset allocation funds) can offer a more balanced and safer route at elevated market levels, and additionally, debt and gold funds can offer stability and diversification—especially useful at market peaks. However she cautions that with interest rates stabilising and geopolitical tensions easing, these categories can play a defensive role and it's important to note that even gold has rallied, so exposure should be based on asset allocation plans and not purely short-term sentiment.'Yes, hybrid funds are a good option to consider and are a safe route as well – the fund automatically rebalances across asset classes depending on market valuations. One can consider the Balanced Advantage category along with the multi asset category. Investors should go through the detailed fact sheets of the fund to understand the asset allocation model before investing,' Dhawan recommended'Debt does look like a good option, with liquidity back to surplus, lower GDP growth compared to the initial print, and the possibility of additional rate cuts – one can look to add duration into the portfolio. Investors can consider constant maturity funds with an exposure of 25% on the overall fixed income portfolio'He added that Gold has surged higher in recent times, and it's very common for investors to chase previous returns, and based on current prices, gold does look overvalued. 'As a result, it would be prudent to limit exposure to 5% -10% of the portfolio and invest via an SIP route rather than a lump sum option. As an alternative, one can consider Silver Funds – Silver looks relatively undervalued compared to gold, but does come with additional volatility, which can be mitigated with a combined gold and silver instrument with a long-term investment horizon,' Dhawan should always choose a scheme based on risk appetite, investment horizon, and goals.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)If you have any mutual fund queries, message on ET Mutual Funds on Facebook/Twitter. We will get it answered by our panel of experts. Do share your questions on ETMFqueries@ alongwith your age, risk profile, and Twitter handle.
