The global economy is already experiencing a slowdown due to the coronavirus pandemic. With businesses of various sectors coming to stand still, there would be a rise in unemployment level and fall in consumer demand. As the modern world is facing the challenge of a global pandemic for which it was unprepared, one may not be able to talk about the severity of its impact on the economy for the days to come. The investor community has also been experiencing volatility and uncertainties due to this economic situation. However, during this volatile period, investing in equity mutual funds with certain strategies can help you achieve financial goals with stability and optimum return.
So, how can you strategize your equity fund investments to get maximum returns and stability?
Equity mutual fund investment strategies for optimum returns and stability
In the current market scenario, having a long-term investment strategy can optimize your returns in an equity-based investment. Here are certain tips to define your long-term equity mutual fund investment strategy for generating maximum returns and stability –
- Be disciplined and invest systematically: In this volatile market, it is important to follow a disciplined approach towards investment. Save regularly and systematically which will not be heavy on your wallets. With the professional management of your money, equity mutual fund investments offer you a choice to invest a certain fixed amount systematically every month. A systematic investment plan helps you tide over market volatility as it works on the principle of rupee cost averaging. As the markets are down if you have already invested in best performing equity funds through SIP, consider increasing your monthly investment amount.
SIP is the best way to invest in equity mutual funds during the volatile market to achieve your long-term financial goals along with helping your investments to stay stable during market turbulence.
- Diversify within the equity fund choices: There are multiple equity fund types are available to choose to depend on your investing style, risk-taking ability, and goal. Classification of equity funds is done on the basis of the market capitalization of underlying stocks in the portfolio, diversification, taxation and by sector-orientation and investing themes. In the volatile market scenario, you can diversify your equity fund investments among the various classification of equity funds such as large-cap funds, value funds, focused equity funds, sectoral funds, and thematic funds. For example, as the pharma sector has become attractive again and expected to perform well in the coming days, you can choose to invest part of your money in sectoral-pharma funds. For long-term stability, you can consider investing a major part of your money in large-cap equity funds that invest in blue-chip stocks.
- Evaluate the fund performance: Once you decide on the classification of equity funds for your consideration, it is important to evaluate the performance of funds in each category so that you can invest in best performing equity funds. When it comes to evaluating performance, you need to also have a long-term outlook in consideration of past performance. For example, if you are planning to invest in large-cap funds, sectoral-pharma funds, and focused funds you need to list out the best performing equity funds in each category. There is Axis bluechip fund, HDFC index Sensex fund, and Mirae asset large-cap fund at the top in large-cap category. You can refer to ETmoney to know best-performing equity funds in each category.
- Make the right choice: Once you list out the best performing equity funds, you need to choose the right funds among the list that fits into your goals and risk appetite.
Diversification and systematic investments are the keys to long-term equity investment strategies that can optimize your return with stability. However, your investment decision should primarily be on your liquidity preferences, time horizon, investment goals, and risk appetite.
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