Markets are Crashing Post Corona Virus Outbreak – Is it the right time to Invest in Mutual Funds?

Last Updated : March 23, 2020, 5:54 p.m.

Among the various investment avenues such as fixed deposit, PPF, bonds, stocks, mutual funds have been a popular choice for many in the past few years. The mutual fund assets or AUM (assets under management) in India has soared to 27.22 lakh crores with around 8 crore odd folio nos.

Mutual funds offer simplicity, diversification, transparency, low cost and investing expertise for a know nothing person. Basis one’s risk profile, investment objective, time horizon and return expectation, one can choose to invest from debt, balanced and equity mutual funds.

With the benefits mutual funds provide, anytime is a good time to start investing but none better than now. Lets us explain why?

• The Indian stock markets-Sensex & Nifty, owing to a Corona Virus-led global stock market collapse, have corrected sharply-about -38% from the last highs.
• Equity mutual funds which invest in stocks have also corrected by about 30-35%.
• So it’s like you were about to buy something at Rs 100 which you are now getting at Rs 65
• When looking to invest in mutual funds, look at large cap equity funds which invest in India’s largest and best companies.
• This is also a good time to invest in debt funds as interest rates are expected to come down and the bond yields will go up resulting in a good return from debt funds, certainly better than fixed deposits.

However, asset allocation is extremely important while investing in mutual funds. Asset allocation means diversifying your investments into different kind of mutual funds basis your risk profile, objective, age and time horizon.

If you have a moderate to aggressive risk profile, we would advise you to invest 70-80% in large cap equity mutual funds at this juncture through SIP/STP route. If you are a first time investor, there is no better time to start an SIP/STP, and if you have invested before, this is a great time to top-up your investment. The rest 20-30% can be invested in short term debt funds or liquid funds.

If you have a conservative risk profile your asset allocation can be opposite-20-30% in large cap equity funds and the rest 70-80% in debt mutual funds.

“We simply attempt to be fearful when other are greedy and to be greedy when others are fearful”-Warren Buffet

There is a lot of fear, panic right now and maximum returns are generated from investments made in these times.