Sensex, Nifty at fresh highs: How to invest in Mutual Funds? Expert’s advice

Sensex, Nifty at fresh highs: How to invest in Mutual Funds? Expert’s advice

New Delhi: The Sensex has surged above 80,000 level. Over the past year, the BSE Sensex – TRI has shown a robust increase of approximately 24.25%. Similarly, over the last three and five years, the index has delivered returns of about 16.50% and 16.35% respectively. With the market at these elevated levels, mutual fund investors may seek to maximise their returns.

Experts recommend a balanced allocation strategy, such as the traditional 60:40 equity-to-debt ratio. However, if investors have raised their equity allocation to 70%, what actions should they consider now that the market has hit a new peak? Dhananjay Banthia, Founder & CEO of Smart Acumen Consulting, outlined strategies for mutual fund investors aiming to navigate these market highs.

Sensex @80000: Factors Influencing Investment Strategy

When deciding what to do with investments around the 80,000 mark, consider these three key factors:

Requirement of Funds: Evaluate your financial needs and the purpose of your investments.
Distance from Goals: Determine how far you are from achieving your financial goals.
Starting Point of Investment Journey: Assess your initial investment position and experience.

Investment Strategy Based on Equity Allocation

If your equity allocation is high, here are considerations for your strategy:

Long-term Investor Perspective

If you are comfortable with market fluctuations and aim to benefit from compounding over the long term, maintaining your current strategy may be advisable.
Experts often recommend a strategic allocation like 60:40 (equity:debt), which provides stability across different market scenarios.
During market corrections, avoid hasty redemptions, as many investors tend to panic sell.

Systematic Investment Plans (SIP) and Systematic Transfer Plans (STP)

SIP for Consistency: SIPs provide a consistent investment approach regardless of market levels, leveraging the law of averages over time.

STP as an Option

Consider STPs if you prefer not to invest lump sums directly. This strategy involves systematically transferring funds from debt or liquid categories to equity.

Conservative Investor Approach

Multi-Asset Allocation or Balanced Advantage Funds

Conservative investors may find these funds suitable at the 80,000 level, providing a balanced approach with reduced volatility.

Market Valuation Considerations

Investment Timing
Make decisions based on market valuation and entry points.
Starting investments gradually can be prudent at this stage.

Advice for First-Time Investors

Benefit of SIP

SIPs are advantageous for new investors, leveraging the law of averages over time.
Consider mid-cap funds for a 3-6 year timeframe, while balanced and large-cap funds can be suitable for longer-term goals.

Small Cap and Mid-Cap Returns

Risk Management

Evaluate expected returns and consider shifting investments from small-cap to large-cap for reduced risk exposure.

Nearing Financial Goals

Transitioning from Equity to Debt: As you approach your financial goals within 6 months to 2 years, consider shifting from equity to debt markets. For a balanced approach with equity exposure, opt for balanced advantage or multi-asset category funds.

By aligning your investment strategy with these guidelines, you can make informed decisions tailored to your financial objectives and risk tolerance.

 Mutual Fund investment: As you approach your financial goals within 6 months to 2 years, consider shifting from equity to debt markets. For a balanced approach with equity exposure, opt for balanced advantage or multi-asset category funds.  Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today