Which categories of mutual funds are doing better during COVID-19?
Mutual funds in India have been performing relatively decently even amidst the ongoing coronavirus pandemic. The best mutual fund recommended by experts may not always be the best option for your needs. The best solution for you is always tailored towards your own investment horizon, specific objectives and overall risk profile. You should be additionally careful amidst the pandemic although the parameters mentioned here should be followed to the hilt.
Take into account mutual fund risks and mutual fund performance before investing. If you require liquidity, then check the mutual fund liquidity aspect with care as well. Suppose you are investing for 1-2 years with lower appetite for risks, then you can choose debt mutual funds. If you are investing for a year’s time, you may check out ultra short duration funds. If you are investing for 2 years or even higher, consider short duration funds. These are categories that are doing better throughout the coronavirus pandemic.
Keep in mind mutual funds market risks particularly if you have invested in equity funds for the long haul. You would do well to stay invested without panicking as per expert recommendations. You should deploy monthly mutual fund investments via SIPs for minimizing and spreading out risks. Remember that low-risk options will provide lower returns although this does not equate to choosing high-risk investment options for generating superior returns when you are deploying investments for smaller durations. This strategy may not work. The priority here should be safeguarding capital instead of attempting to earn more returns. You can take on more risks and invest in equities if you are looking to remain invested for longer durations. This is suitable since you will have more time at hand for waiting for markets to undergo corrections and make up all previous losses.
People are undertaking investments in mutual funds in India with a view towards maintaining proper liquidity in these challenging times. While investing in mutual fund options, you should keep a proper chunk in schemes which can be liquidated swiftly. This will help you overcome any sudden financial crisis without any hassles. You should not invest in funds in long-term plans when you may require sudden cash for the short-term as well.
You should check the mutual fund ratings with a lot of care and caution prior to investing in any scheme. You should check how funds are rated by agencies such as ICRA and CRISIL among others. Steer clear of low-rated funds in the present market circumstances. Ratings are not the only criteria for ascertaining investments in mutual fund plans; you should also view other major aspects like the portfolio and performance at the same time. For debt funds, check asset credit ratings within the portfolio along with the portfolio concentration of the fund itself. There should be suitable diversification as well. Expense ratio, reputation and track record of fund managers are other aspects worth noting while choosing any mutual fund in the current scenario.
