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Time To Re-Invest In Mutual Funds?

Monday, February 02, 2015
By Rashmi Roddam

Rashmi Roddam Director, WealthRays Securities

We have seen markets rallying since last year and all equity funds whether large, mid or small cap achieving even over 100% returns. Many retail investors have even sold their funds and have booked profits. With markets raising higher and higher is it good to re-invest again at this moment or one should wait for markets to correct. We even saw interest rate cut which came as a surprise and gave opportunity for investor to enter into debt funds too.
As we believe in India shining story, it is always good to be invested in markets whether equity or debt. If an investor has invested in a mutual fund through SIP, then booking profits and continuing SIP would be the best idea. For those who have invested as a lump-sum amount and booked profits, split the amount and invest now and the rest post budget.

Expectations from upcoming budget has been good which will move the markets further up with retail sector gaining momemtum with “Make in India” campaign. Re-investing in a sector based fund would be one of the options as infrastructure, real estate and pharma sectors would also benefit.
Choosing a growth fund would also be of benefit. Timing of investment may not be possible though, instead one should re-investing their funds more in equity funds. One of the ways could be invest in an equity fund and opt for systematic transfer to a debt fund. Increase the amount of investment in equity funds month on month in case of SIP or every quarter in case of lump-sum investment so that you could benefit even if markets are bad.

It is not necessary that you choose the same fund from where you had booked profits recently. Check for the funds that have performed well for last 3 years, then re-invest in a fund that is doing well consistently. Fund that you had invested might have given positive returns but there could be other funds which would have performed better that the fund you had invested in. Though you were in profit, there could be a notional loss when compared to better performing funds. However it is always suggested to understand the fund before investing as you could choose based on your risk appetite.

With expectations from budget on affordable housing, one could look at investing in a large cap fund skewed towards real-estate stocks. Allocate more funds for post budget investments and one should ensure that they continue SIP based investments in equity funds.

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