MF systems that help reduce the risk of investing in stocks


As Indian benchmarks are hitting new highs every day, investors can look for mutual funds that invest in various asset classes to minimize risk. Two such options are balanced advantage funds and multi-asset funds.

Balanced Advantage Funds, also known as dynamic asset allocation funds, are a class of hybrid mutual funds that invest in stocks and debt and continue to shift their asset allocation based on valuations. of the market. Since they are classified as equity funds by the market regulator, they will have 65% of their investments in stocks and related instruments.

The advantage of such funds, according to Raghav Iyengar, commercial director of Axis Mutual Fund, is that their managers can reduce what is called “unhedged equity”. They are ideal for conservative investors who don’t want to invest all of their money in stocks at one point, but also want the experience of investing in stocks, he said.

“Let’s say if the markets are very high, as people think today, the portfolio model shows that you need to reduce your exposure to equities; exposure to equities is reduced to around 44-45%, then 20% is invested in arbitrage funds, so the total becomes 65%, ”he said in BloombergQuint’s weekly series. The Mutual Fund Show. “The remaining 35% are in debt.

Multi-asset funds are generally open-ended systems investing in stocks and related instruments; debt and money market instruments; and those related to gold.

Iyengar said these funds provide investors with “rounded long-term exposure” and are useful for those who cannot call upon asset allocation themselves. To achieve this, such programs, he said, place capital in a set of assets that are negatively correlated or that do not move in tandem with each other.

Santosh Joseph, Founder and Managing Partner of Germinate Investor Services LLP, said these two programs are “forward looking categories” because they answer two critical questions for the investor: “Can I stay invested regardless of the good or bad? bad times in the markets? and “Can I stay invested regardless of market movements?” “

Multi-asset programs are going to “blossom into a big category” as they will see massive inflows in the days and years to come, he said. “Taking profits on stocks at high levels and putting that money in debt, and vice versa when the stocks are right, will result in a pleasant investment experience for an investor, allowing them to stay invested. for a long time and create wealth. . “

For the multi-asset category, Joseph recommended funds from HDFC, Motilal Oswal, Nippon India AMC, ICICI Prudential and Axis, and in the balanced benefits segment, he suggested funds from Axis AMC, DSP Mutual Fund, IDFC Mutual Fund and Edelweiss AMC.

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