If you are not adept at stock picking or lack the time to do your own research, mutual funds would remain your best bet.
With equity markets sizzling in 2017, hordes of investors took the mutual fund route to creating wealth. According to the Association of Mutual Funds in India (Amfi) a record Rs 1.3 lakh crore found its way into equity mutual funds in 2017, taking the total assets under such funds to Rs 7.7 lakh crore against Rs 4.7 lakh crore a year ago.
There are expectations that 2018 could also see equity markets remaining strong with the bull-run likely to continue. “The shift of capital from other asset classes to equities is likely to fashion itself further as we move deeper in 2018. Close to Rs 6,000 crores are being invested through mutual funds every month. A similar amount is entering the markets through direct equity investments, alternative investment funds (AIF), PMS and other such instruments. This figure is likely to balloon higher as the year progresses,” Siddharth Oberoi, Founder, Prudent Equity, told Moneycontrol.
If you keen to make gains out of stocks and are not adept at stock picking or lack the time to do your own research, mutual funds would remain the best vehicle to make gains from the rise in stock prices.
However, the question that you would be asking is which funds to invest in? There is a wide option of fund offerings and choosing a good fund is never an easy task. S. Sridharan, Head, Financial Planning, Wealth Ladder Investment Advisors feels investors should opt for large-cap diversified funds and balanced funds in 2018. “As the valuations are peaking in small- and mid-cap space, it is advisable to invest in a large-cap, diversified and balanced fund to mitigate the risk. The diversified funds have a mandate of investing in mid- and small-cap, the exposure can be restricted to the small portion which would deliver a superior return in case of an uptrend in the space,” he said.
On debt funds, Sridharan suggests credit opportunities funds. “As far as the debt is concerned, the duration funds have failed to deliver superior returns as interest rate did not come down in 2017. In 2018, there is a rare chance for reduction in interest rate since the rise in crude price will put pressure on inflation. Hence we suggest investors choose the credit opportunities, short- and medium-term funds rather than dynamic bond funds,” he said.
Sridharan’s top 5 fund picks in the equity and debt space are, which he says “are handpicked based on quality and quantity parameters.”
Equity (5+ years holding)
Debt (2-3 year time horizon)
However, for the overall portfolio, Sridharan suggests proper asset allocation. “It is always advisable to invest in an asset allocated portfolio which would protect the portfolio when there is a downfall in the market,” he said.