An overview of the most stable mutual fund strategies during turbulent times
The ups and downs of the stock market are something an equity investor has to deal with all the time. But the Coronavirus epidemic of 2020 has been in a class of its own. It has sent stock markets over the world in a steep plunge. At times like these, most investors would shy away, but you can always opt for the most stable mutual fund strategies.
So, is it better to steer clear of equity funds now? What should your investment strategy be? Let's look at what you should be doing.
Remember that bad times don't last forever. Things may appear uncertain at the moment, but this phase will pass. It is especially true of the equity markets. At a time when some share prices and sectors are performing well, it could be an opportunity to invest in some large-cap mutual funds.
Large-cap funds invest in big corporate names. Their stocks tend to be less volatile and better than mid-cap or small-cap stocks. So when the market is bearish, you can expect your notional losses to be contained. Click here to read more on large-cap mutual funds.
Hybrid or balanced funds
Another one of the stable mutual funds is balanced or hybrid funds. These invest in a mix of asset classes, which allows you to hedge your bets. Since each portfolio is diversified between debt and equity securities, you needn't worry about market risks and other uncertainties. Click here to read more on hybrid mutual funds.
Systematic Investment Plan (SIP)
When share prices take a beating, you can choose to invest through SIPs. That way, you can benefit from Rupee cost averaging.
What is Rupee cost averaging? Well, when you are investing in a mutual fund through the SIP route, you are putting in a fixed amount each month, regardless of the share price. So when prices are low, you get more mutual fund units, and less when prices are high. During a downturn in the market, you will be getting more mutual fund units. To understand this concept, better read more.
The most stable mutual funds strategies are designed to combat turbulent times. The current COVID-19 outbreak is one such situation where fear is not the best choice. It's a time to evaluate your opportunities and re-think your portfolio. You can make good returns with smart investments and we at digibank by DBS are with you all the way. Download our app and get started - #smartinvesting.