Divya wishes to invest in investment options that can help her achieve her financial objectives. Since she lacks the time and expertise to directly invest in the markets, Divya decides to invest in mutual funds. However, she is unsure about the investment strategy that she should adopt to ensure maximum capital appreciation. In this article, we will try to throw some light on the mutual fund strategies that you can consider adopting in 2022. Read on to know more.
Mutual fund strategies to follow in 2022
Here are a few mutual fund strategies that you as an investor might consider following in 2022:
- Avoid falling into the trap of recent bias investment trap
As the Indian equity markets have offered exceptional returns to investors in 2021, there are high chances that investors might deduce the returns achieved in 2021 to 2022 and perhaps beyond that as well. However, one must understand that it is highly unlikely that the returns on equity funds would be consistent at this rate going forward. Hence, it’s important for investors to lower their expectations from equity funds especially for short-term performance. - Diversify your funds across countries
While it is a good idea to diversify your investment portfolio across sectors and asset classes, you might also consider diversifying your investment portfolio across locations as well. Though India has enjoyed the benefits of one of the best performing markets worldwide, research shows that winners rotate and so does the best performing markets across geographies. Hence, investors are advised to own a globally diversified investment portfolio. - Do not chase high yields debt instruments
While it is tempting to purchase debt instruments that provide higher yields, one must not forget the lesson learned in 2021 of not purchasing low rated bonds in order to earn higher returns. Several investors faced significant challenges as their funds were stuck in these low-rated bonds. If you are an investor who is comfortable with higher levels of risk, you might consider allocating a small proportion of your funds to low yield bonds to earn higher returns. - Rebalancing your investment portfolio
As the equity markets are outperforming in the recent scenarios, it might be a good idea to rebalance your investment portfolio and allocate a higher proportion of your assets in fixed income securities. You might consider availing the services of a mutual fund expert if you are unsure how to go about rebalancing your portfolio. - Do not exit gold due to its recent underperformance
Gold is believed to have a negative correlation to equities. Hence, it might not be absurd to see the gold markets underperforming when equities are soaring high with exceptional returns. It might be a good idea to continue to allocate a part of your funds to gold securities to protect your portfolio from equity and equity-related securities.
Do not forget the basic rule of investing in mutual funds – always invest in mutual fund schemes that are in line with your investment portfolio. The objectives of your funds must align with your investment duration, financial goals, and risk profile. You might also compare mutual funds to choose the funds that are best for your portfolio. Happy investing!