The novel coronavirus has taken the entire world by a storm. A turbulent one though. Even mutual funds have come under its attack. Read on to know how funds are faring right now and how to invest during this pandemic.
Mutual Funds in the times of coronavirus
Economies across the globe have come almost come to a standstill as a result of the coronavirus pandemic. Stock markets have crashed and mutual fund values have plunged to rock-bottom. As per data published by Morningstar India, the equity scheme categories have given 25%- 26% negative returns in the period starting mid-Feb to mid-March. Here is how the individual sub-categories have performed:
One important point to note is that all funds have fallen lesser than their respective benchmark during this bearish phase. During this period, Sensex fell down by about 29% (from 41,000 to 29,000).
Investors who used to rely on the offline mode for mutual fund investments have faced a double-whammy. As a safety measure, AMFI (Association of Mutual Funds in India) has closed down the offices of AMCs as well as Register and Transfer Agents. As a result, investors depending on physical transactions will not be able to submit the forms for any transactions (new purchase, switch in or out, withdrawals, etc). Only online transactions are permitted during this period.
So, should you not invest in Mutual Funds?
Tough times do not last, but tough people do. The same holds true for quality mutual funds as well. The markets have witnessed such volatility and fall in the past as well. Such as the Harshad Mehta Scam in 1992 (which caused the stock markets to fall more than 55%), the tech bubble burst in 2000 (more than 60% tumble in the markets), or the 2008 global financial crisis (62% loss in the markets). However, one thing that is common in all these scenarios is that the markets have always made a recovery in due time.
So, the answer to the question is that go with mutual funds for COVID-19 crisis. All you need to ensure is that you select funds amongst the top performers during this crisis, hang in there and wait for the chaos to settle down.
Points to remember:
- Continue with the Systematic Investment Plan (SIP) contributions.
- If your portfolio has lesser equity exposure (in comparison to your risk appetite), it is a good time to increase the level of equity investment as the valuations have become attractive.
- Remember that equities have always been a long-term game. More so, in the current pandemic. Have an investment horizon of at least 8-10 years.
- For debt funds, increased focus on funds with short duration and good liquidity can strengthen your defense.
- Opt for funds which have a solid track record, robust investment strategies and strong management team. You can select from consistent or top performers over the past five years. Such funds are likely to bounce back faster and stronger once this pandemic is over.
Top Performers during the crisis
There are some mutual funds for the COVID-19 crisis as well. These funds have contained turbulent market periods relatively well and emerged as the top performers during the crisis. Most of these funds also find a place in the list of top performers over the last 5 years.
- Axis Bluechip Fund
- SBI Focused Equity Fund
- Motilal Oswal Focused 25 Fund
- Mirae Asset Large Cap Fund
- Tata Index Sensex Fund
- HDFC Index Sensex Fund
- ICICI Prudential Bluechip Fund
- Kotak Bluechip Fund
- Quant Focussed Fund
Final Words
These are unprecedented times. There will be occasions when your patience will get tested and you will want to give up. But you need to remember that mutual funds for the COVID-19 crisis are also a thing. Just like every dark cloud has a silver lining, mutual funds (especially the top performers over the last 5 years) will start rising again. We will come out of these volatile times stronger and charged up!
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