No wonder, many investors are asking whether they can invest in some mutual funds that will help them to deal with the volatility better. Most of you would know the answer to that question. It is almost impossible to avoid volatility totally when you are investing in the stock markets. You might know the stock market is always risky and volatile, especially in the short term. The only way to tackle it is to stay invested for a long period.
When you invest for a long period to meet your long-term goals, you can deal with the ups and downs better and maximise the returns. In fact, your SIP investments do exactly this: when you are investing every month, you tend to average your purchase cost. It also imparts financial discipline. Also, when you look back, most of these calamities would look like small blips.
Enough of theory. Are there any mutual fund schemes that will help you to deal with the volatility better? Before that You should also ask whether it is wise to invest in certain schemes to deal with volatility? What will happen to your investments that you have been making according to your investment plans?
Mutual fund managers and advisors would tell you that it is not a great idea to alter your investment plans based on the market conditions. If you keep on chasing schemes that are market favourites, you will miss out on great opportunities over a long period of time. Also, you would be tired of getting in and out of schemes all the time. After all that you would mostly end up with average returns as timing the market is next to impossible. Sometimes you may be too early or too late to the party. That is why financial planners ask regular salary earners to invest via systematic investment plan to maximise returns and to have peace of mind.
Having said that, what if you want to make a tactical allocation to some categories that are relatively safer? Mutual fund managers have been asking new and very conservative investors to choose balanced advantage schemes or dynamic allocation schemes to deal with the volatility better. Dynamic allocation funds decides on the equity allocation based on the market conditions and valuations. When the market is expensive, they invest less in equity. That is what makes them a safe bet for cautious investors.
Large cap mutual funds invest in stocks of very large companies. These spaniel are often leaders in their respective fields and they are resilient to shocks in the economy and the market. Sure, they might also be hit by major changes in the economy and market, but they fare better than other segments of the markets like, say, mid cap or small cap schemes.this is the reason why financial planners or advisors recommend large cap mutual funds to conservative investors to meet their long-term goals.
