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  5. Easy tips to protect Mutual Funds portfolio in volatile and downturn market

Easy tips to protect Mutual Funds portfolio in volatile and downturn market

Indian Mutual Funds market AUM has recently crossed over Rs 36 lakh crore. Average Assets Under Management (AAUM) of the Indian Mutual Fund Industry for the month of August 2021 stood at Rs 36,09,471 crore. Here are a few tips to protect Mutual Funds portfolios in the downturn and volatile market.

Abhinav Ranjan Abhinav Ranjan @abhinav_1108
New Delhi Updated on: November 08, 2021 10:56 IST
mutual funds
Image Source : PTI

The Mutual Fund Industry’s AUM had crossed the milestone of Rs 10 lakh crore for the first time in May 2014 and in a short span of about three years, the AUM size had increased more than two folds and crossed Rs 20 lakh crore for the first time in August 2017. The AUM size crossed Rs 30 lakh crore for the first time in November 2020.

The Indian mutual fund space has witnessed an expansion amid the Covid-19 pandemic. Top fund houses have registered growth in the range of 8-16 per cent this year in their assets under management (AUM). Indian Mutual Funds market AUM has recently crossed over Rs 36 lakh crore. Average Assets Under Management (AAUM) of the Indian Mutual Fund Industry for the month of August 2021 stood at Rs 36,09,471 crore. Assets Under Management (AUM) of the Indian Mutual Fund Industry as on August 31, 2021 stood at Rs 36,59,445 crore.

The Mutual Fund segment as an investment arena has seen a great rally in the past 1.5 years. Noteworthy, there are mutual funds that have given more than 100% returns in this rally. Now, when Nifty is placed above 18,000 level and Sensex has already breached the 61,000, investors are concerned whether to book returns in such a highly volatile market or stay invested.

According to Ravi Singhal, Vice- Chairman, GCL Securities Limited, mutual funds are always recommended as one of the best ways of investment if someone wants to put in his/her money in security markets and reap healthy returns. But it becomes crucial to protest funds passively so that both investment and returns are not affected if market situation changes.

Tips to protect Mutual Funds portfolio in the downturn and volatile market:

  1. Rebalance portfolio with Dynamic Asset Allocation (Balanced Advantage) Funds: Dynamic Asset helps reduce downside risk by diversifying investments. It tracks the performance of all asset classes and reduces allocation from overvalued assets and allocates at the time of reasonable pricing.
  2. Invest through SIP mode: The SIP method helps in buying more units when the market is down and thus averaging the price.
  3. Invest through STP instead of Lump Sum: While investing in the market with a lump sum mode, it's always advisable to invest through the Systematic Transfer Plan (STP) model. Through STP, funds are parked in the debt market and invested in the equity market in some installments, which helps to beat volatility.
  4. Stay invested in goal-oriented investment: By investing money for the long term, meaning having a specific goal in mind irrespective of current market level, an investor can get handsome returns from the equity market by parking funds in good companies. Notably, the equity market has never given negative returns in 10 years.

The Mutual Fund Industry’s AUM had crossed the milestone of Rs 10 lakh crore for the first time in May 2014 and in a short span of about three years, the AUM size had increased more than two folds and crossed Rs 20 lakh crore for the first time in August 2017. The AUM size crossed Rs 30 lakh crore for the first time in November 2020, according to the Association of Mutual Funds in India (AMFI).

The mutual fund industry had crossed a milestone of 10 crore folios during the month of May 2021. The total number of accounts (or folios as per mutual fund parlance) as on August 31, 2021 stood at 10.86 crore (108.6 million), while the number of folios under Equity, Hybrid and Solution Oriented Schemes, wherein the maximum investment is from retail segment stood at about 8.95 crore (89.5 million). according to AMFI.

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