The Hindu Business Line : Invest in phases, advise fund houses

Kolkata, June 5 Retail investors in mutual funds should allocate their investments in phases over the next three-four months even while keeping a close watch on the forthcoming Union Budget and the policy reforms that may unfold with the new Government taking charge, according to asset management companies and consultants.

“While the new investors may have missed out on the bottom prices for entering mutual fund investments, they should not put (in) all their money in one go now that the market is looking up,” Mr Rajiv Deep Bajaj, Vice-Chairman and Managing Director, Bajaj Capital, said.

The next few months are expected to bring some good news on the domestic front and some bad news on the international, Mr Vikaas M. Sachdeva, Country Head (Business Development), Bharti AXA Investment Managers, said, adding that a one-way rally was unlikely during the period. “Some volatility is expected to persist this year and the best way to enter the market now is by splitting across the investment plans for the next few months,” he said.

Diversify portfolio

Investors should diversify their portfolio rather than rely only on the best performing sectors, Mr Bajaj said. Infrastructure funds had been doing better than large-cap funds and the sector, along with others such as healthcare and the finance, was expected to receive due attention from the new Government. “Infrastructure should ideally constitute about 20 per cent of an investor’s equity portfolio,” he said, while pointing out that the proportion of equity investment should primarily be governed by an individual’s risk appetite.

First-time investors should look at investing in large- and flexi-cap funds, believed to be less volatile than the mid- and small-cap peers, he observed. The mid- and small-cap indices however outperformed the large-cap index over the last month by a considerable margin.

Making plans

Investors should take a long-term view and prefer systematic investment plans in order to build a corpus before appropriating returns, Mr Waqar Naqvi, Chief Executive, Taurus Mutual Fund, said.

First-time investors should opt for funds having stocks with a moderate turnover ratio as aggressive funds with high turnover ratios tend to be more volatile, he said, adding that funds having more than 50 per cent benchmark stocks may also engender some discipline in the investment baskets.

“An important lesson to be learnt by investors from last year is that the role of the fund distributors in facilitating asset allocation should not be ignored,” Mr Sachdeva said. The fund houses have been emphasising on imparting higher training to brokers, he added.

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