Three Dilemmas at Present: What to Do, Where to Invest & How Much?
As we enter the new financial year, the memories of a very different and challenging previous year came back due to concerns over surging Covid cases again. While the second wave of Covid-19 is causing some nervousness among investors, the stock market continues to remain firm at present. Such scenarios are always testing times for investors and create a dilemma of what should you do with your investment. We would like to solve this problem for you by sharing our views on three of the most important questions that are probably going in your mind at present related to your investment.
What should you do with your existing equity mutual funds?
Most of us continue to hold investment in equities directly or through equity mutual funds. In our view, you should continue to hold on with your equity investments even though the markets continue to surge. If you had invested at same time last year in equity mutual funds, the return on these investments may tempt you to book profits, the return from equity funds in last one year ranges from 50% to more than 100% depending on the funds you invested in. We suggest you hold on with those investments along with your other long term equity investments because you did the right thing by investing when the markets were falling. Now you should give it time to deliver better results for you over a period. You should only redeem if you are nearing your financial goal, else remaining invested at present will work for you.
What strategy should you follow for new investment
While there exist some sort of uncertainty which can result in volatile markets, it would be a better strategy to invest in a gradual manner at present if you have any investible surplus. Let say you have Rs.100 of lumpsum money to invest in equities at present, we suggest you to invest Rs.40 at present in one go and remaining Rs.60 can be invested over next 6 months through SIPs of Rs.10 each month. You should continue with your existing SIPs and should not pause or stop it because of market conditions.
Which equity funds you can look at investing in at present
While 1 year performance of all equity funds looks attractive at present, but that certainly cannot be the benchmark for deciding which funds are good to invest. There are more than 350 equity funds which ones can you consider investing in. To make your life easy, we have selected few funds from different categories based on multiple qualitative and quantitative parameters across different market cycles through our research process.
Large Cap Funds
Large Cap Funds invest in well-established and big companies also known as Bluechip stocks. The aim is to generate steady capital appreciation with less volatility.
| Funds | 1 Year Return | 3 Year Return | 5 Year Return |
|---|---|---|---|
| Canara Robeco Bluechip Equity Fund | 70.95% | 17.23% | 16.58% |
| Axis Bluechip Fund | 56.02% | 16.49% | 16.56% |
| Mirae Asset Large Cap Fund | 76.00% | 13.74% | 16.30% |
Large & Mid Cap Funds
Large & Mid Cap Funds invest in bluechip and aggressive medium-sized companies. Potential to generate higher return with additional risk of mid cap.
| Funds | 1 Year Return | 3 Year Return | 5 Year Return |
|---|---|---|---|
| Mirae Asset Emerging Bluechip Fund * | 93.01% | 18.53% | 21.60% |
| Canara Robeco Emerging Equities Fund | 79.70% | 13.08% | 18.15% |
| Kotak Equity Opportunities Fund | 78.71% | 14.00% | 16.24% |
| * New SIPs of upto Rs.2,500 per month are permitted in this fund. SIPs of existing investors will continue as per their registered SIP amount. | |||
Flexi Cap
Flexi Cap Funds invest across large, mid & small sized companies. Covers the overall potential of stock markets due to the flexibility to invest depending on opportunities.
| Funds | 1 Year Return | 3 Year Return | 5 Year Return |
|---|---|---|---|
| Parag Parikh Flexi Cap Fund | 85.90% | 19.71% | 18.01% |
| UTI Flexi Cap Fund | 89.71% | 18.50% | 17.30% |
| SBI Focused Equity Fund | 60.46% | 13.00% | 15.87% |
Mid Cap Fund
Mid Cap Funds invest in medium-sized companies that have the potential to grow faster. Good for investors with a high-risk taking ability because of volatility during tough market conditions
| Funds | 1 Year Return | 3 Year Return | 5 Year Return |
|---|---|---|---|
| Axis Mid Cap Fund | 71.47% | 18.02% | 18.92% |
| DSP Mid Cap Fund | 77.39% | 12.15% | 16.96% |
| Invesco India Midcap Fund | 79.78% | 14.35% | 16.75% |
Small Cap
Small Cap Funds invest in small-sized companies often at nascent stage. High growth potential with very high risk, extremely volatile across market cycles
| Funds | 1 Year Return | 3 Year Return | 5 Year Return |
|---|---|---|---|
| SBI Small Cap Fund | 99.90% | 13.62% | 20.69% |
| Kotak Small Cap Fund | 132.89% | 16.01% | 18.39% |
| Axis Small Cap Fund | 85.26% | 17.17% | 18.37% |
Tax Saver Funds (ELSS)
Tax Saver Funds invest across large, mid & small sized companies and help you save tax under section 80C. These funds have a lock-in period of 3 years.
| Funds | 1 Year Return | 3 Year Return | 5 Year Return |
|---|---|---|---|
| Mirae Tax Saver Fund | 93.44% | 17.95% | 21.46% |
| Axis Long Term Equity Fund | 65.05% | 14.97% | 16.05% |
| Invesco India Tax Plan | 73.26% | 13.02% | 15.21% |
You can invest in above funds from different categories based on your risk appetite and time horizon. At present investing in a gradual manner can work better for you if you are planning to do lumpsum or one-time investment. Equity funds are meant for long-term investing and you can expect better results from it when you hold it for long term.
To know more about which funds are right for you get in touch with us!
All Returns shown above are annualized return as on 1st April 2021. All fund tables are sorted in descending order based on the 5 years return.