How to build a successful mutual fund portfolio amid market's mood swings
Writer Admin

NEW DELHI: Many investors struggle to choose the right way to invest their hard-earned money. As markets become volatile, they often panic and question their decisions, sometimes leading to hasty and ill-informed actions. During such times, they often exit the market and wait for it to regain stability. However, it’s equally important to understand that volatility is an inherent aspect of the market, and exiting with the hope of re-entering during a 'safer' period is not a sound strategy.
Volatility refers to the market's nature to fall and rise over a period of time and it can be challenging to time investments as these fluctuations are unpredictable. One effective strategy is to avoid short term investments and investing for long periods of time like mutual funds. In mutual funds, volatility risks can be minimized by analyzing the fund portfolio, evaluating the schemes for their alignment with financial goals, and implementing corrective measures if needed.


Say yes to portfolio diversification

While investing funds, it is crucial to diversify your portfolio. By diversifying mutual fund portfolio, investors can protect their assets against any unpredictable volatility.
Investing in multiple categories would decrease the chances of volatility risks while still gaining potential returns.
Allocating a portfolio for mutual funds should be done keeping in mind the calculated risks to have a more stable investment yielding high returns.


Large cap mutual funds are deemed as highly stable and pose less risk. Diversified mutual funds can tolerate market volatility.

Should you exit when the market is bullish?

When the market goes bullish it is not wise to exit as the same stocks may give huge gains when it stabilizes.

When the markets drop, investors can lower the amount of debt investments in the portfolio and increase stock investments to buy good-quality shares at a lower price. Remember, a portfolio should be rebalanced every time whenever asset allocation goals change.


Balancing the portfolio is a key factor to maintaining a good mutual fund profile as it neutralizes the loss.

 

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