Mutual Funds 101 with the Indian Men's hockey team

Harmanpreet Singh of India celebrates with teammates after scoring. (Image:Reuters/Hamad I Mohammed)

The Manpreet Singh-led Indian men’s hockey team scripted history today, victoriously surging 5-4 over Germany in a thrilling comeback match and winning bronze, thereby ending a 41-year drought for an Olympic medal, after having last won accolades in our national sport in the 1980 Moscow Olympics. Ravi Kumar Dahiya’s silver in the Men's 57kg freestyle wrestling was an added delight, adding great luster to India’s medal tally in the ongoing Tokyo Olympics.

To say that our hockey team presented an exemplary display of commitment, grit and spirit would be an understatement, for their victory will inspire generations of young, aspirational, and excellent Indian sportspersons. And back home, perhaps both the country and particularly the stock market have a lot of reasons to celebrate, from Sensex and Nifty climbing new market heights, solid IPO rallies, positive corporate results, and of course, our stellar Olympic accomplishments. With Sensex crossing the coveted 54,000-mark, closing at 54,492 points, and Nifty at 16,294 points, this is the perfect time to gear up and accelerate your investing journey! 

In the process, you need to understand that our investment portfolio also needs a concrete mix of forwards, defenders, midfielders, and goalkeepers, just like our sensational hockey team. Read on to find a basic primer on various kinds of mutual funds you can incorporate in your dream portfolio and win your way to success! 

ForwardsIn a team, forwards are essentially players responsible for scoring the goal. We had Shamsher Singh, Dilpreet Singh, Gurjant Singh, captain Mandeep Singh, and Lalit Kumar Upadhyay primarily tackling the scoring frontier today. As the main point of goal-scoring against the opposition, forwards are conventionally supposed to be aggressive, attacking, vigorous and risk-taking. 

When it comes to mutual funds, equity-oriented funds take up the mantle for the majority of return generation. These funds invest in equity stocks of various companies, which can either be of the highly volatile and dynamic small-cap and mid-cap companies, or the relatively stable large-cap companies. Some equity funds also make specific investments by allocating money to companies that belong to certain sectors like automobiles, IT, consumer durables, pharmaceuticals, infrastructure, and more. 

The reason why equities, in general, are considered highly risky is due to no assured returns because of the unpredictable nature of the market, which means that if hypothetically, a company does not deliver returns or falls out of favor, the stock price will fall, resulting in investors losing money. Or conversely, if a company’s growth skyrockets, you could end up earning a lot of money. The country’s benchmark indices, Sensex (1986) has appreciated almost 9,600 percent since its inception and Nifty has grown almost 1,700 percent since it first began in 1996.

When you’re young and wild, you can bring this streak of yours to your portfolio by substantially investing in these funds, which can ensure ample return creation for you in the long run. Take a look at the performance of these funds over the last 10 years and decide for yourself:

DefendersLed by Harmanpreet Singh, Rupinder Pal Singh, Surendra Kumar, Amit Rohidas and Birendra Lakra and goalkeeper PR Sreejeshthe defenders in any hockey team are responsible for protecting the goal and making sure that the opposite team does not find any easy, weak spots to score through and limit their chances to rack up the score. Defenders are a very important part of the team since they are the main line of protection. 

If your portfolio, too, needs a defender, debt funds are your go-to! These funds invest in debt instruments like bonds, debentures, and more, which come with the promise of steady returns in form of interest throughout the tenure of investment and their less risky nature since they are not directly affected by market uncertainties and volatilities. However, do not completely discount risks when it comes to these funds, since they are subject to credit and interest rate risk as well, but most of these funds invest primarily in fixed-income securities and serve as a cushion against market ups and downs. Here’s a snap of the returns generated by various debt funds over the last 10 years:

P.S. Don’t discount the defenders completely because you don't want to play safe. A penalty scored by Harmanpreet Singh and a stroke by Rupinder Pal Singh is what led us to our historic win! 

MidfieldersEvery team needs some all-rounders, who can effectively switch between offense and defense as and when there is a need. Helmed by Hardik Singh, Manpreet Singh, Vivek Sagar Prasad, Nilakanta Sharma, and Sumit, the midfielders are tasked with being the links and balance in the team, supporting both forwards and defenders. 

Hybrid funds perform similarly, diversifying and balancing between equity and debt so that investors can get the best of both worlds! Depending on the type of hybrid fund and their allocation to equity,  they can either be aggressive or conservative. Hybrid funds allow you to experience market volatility with equity investments and investment safety with debt instruments. Such funds are perfect for those who remain in the grey area- not risk-averse, but also not a high-risk taker as well.

While midfielders Hardik Singh and Simranjeet Singh clinching our bronze-medal win today, try considering the returns generated by these midfielder funds over the years:

Time to start assembling your team of perfect mutual funds?