The best way to take exposure in equities at current market levels would be the mutual fund route since stock selection is done by experts.
The stock market has remained at high levels for a while, with the BSE Sensex consistently ruling above the 31,000 mark. While stock valuations rising, so are risks.
If you are looking for exposure to equities at these levels, one of the best ways is to adopt the mutual fund route since stock selection is done by experts on your behalf.
However, even fund selection can be a tough choice if you are looking to invest in mutual funds for the first time. You might be wondering whether these high market levels is a good time to start, and if so, which are the funds that could give good returns from here on?
Investment experts say if one has a long-term view, any time is a good time to start invest or increase one’s holdings. “A first-time investor or for that matter, any investor, should not be concerned about the stock market levels if he or she is looking to invest for the long term. Volatility is a short-term concept and it is inevitable when we visualise markets over short time periods in the hindsight, in the present or predict in the future,” Vikash Agarwal, Co-Founder, CAGRfunds, told Moneycontrol.
Agarwal first time investor should choose his or her funds based on the objective for investing, risk profile and time horizon. “Assuming that such an investor is investing for the long term (> 5 years), has moderate risk appetite and wants to build wealth, he should start by investing in a Balanced Mutual Fund,” he said.
Agarwal the SIP route for investment. “Market levels do influence mode of investing. Sometimes people tend to time the market and feel that they should invest a lump-sum when markets have fallen to a level from where they are likely to rise. While this hypothesis can be true in some cases, for a first-time investor, it is unlikely that he will be able to find the time and expertise required to conduct such analysis. Attempt to time the market will most likely be inconsistent and sub optimal. Hence, a first-time investor should adopt a SIP route to invest.Planning to invest in mutual funds? Here are 10 fund options to look at
Agarwal suggests the following 5 funds for first-time investors at current levels:Balanced funds:
-ICICI Prudential Balanced Fund
-SBI Balanced FundLarge-cap funds:
-Mirae Asset India Opportunities FundMulti-cap Fund
-Motilal MOST Focussed Multicap 35 Fund
-Kotak Select Focus Fund.
S Sridharan, Head, Financial Planning, Wealth Ladder Investment Advisors said investors should identify their objective, time-horizon and their risk appetite to choose the right fund. For example, if the money is needed in 3 years of time, one should avoid investing in equity-based funds. They should look at only debt-based mutual funds. The investment is not always to get a higher return, it is to be available at the time when you need it.
“The selection of funds should be based on both quantitative and qualitative parameter. The qualitative parameters are like the sponsors of the AMC, fund managers experience, investment philosophy and process, investment objective and style. On the other side, we also have to look at the quantitative parameters like the past performance, risk adjusted return, performance against the volatile market and expense ratio,” Sridharan said.
Here’s Why You Should Invest In Equity Mutual Funds
He said young investors should have a long investment horizon. “If you are a young investor you would like to stay invested for more than 7 years. It is ideal to invest in an asset allocation of 70:30 where 70% can be invested in equity and 30% can be invested in debt. It is ideal to invest in a well-established large-cap mutual fund at this juncture.”Sridharan’s 5 top mutual fund picks for first-timers are:
|Schemes||Asset Class||Category||1 year||3 year||5 year|
|DHFL Pramerica Large cap||Equity||Large cap||13.07%||11.09%||16.14%|
|ICICI Pru Focused Bluechip||Equity||Large cap||16.7%||11.99%||17.43%|
|SBI Bluechip||Equity||Large cap||12.75%||14.55%||19.56%|
|HDFC Medium Term Opportunities||Debt||Medium Term Income||9.00%||9.68%||9.47%|
|Birla SL Treasury Optimiser||Debt||Income||8.62%||10.28%||10.14%|