How diversification with the help of equity and debt mutual funds is important in times of volatilit

The sharp fall in equity markets during the onset of Covid in March last year in 2020 was a wake-up call for investors to diversify their investments across sectors, assets and market caps. As the adage goes about not putting all your eggs in the same basket, if you invest your entire money in stocks of a single company or a single asset, you may end up losing money.

Some company stocks could be more volatile than others. Thus, it is a prudent decision to invest in a portfolio of different stocks. As a retail investor, it is complex and time-consuming to pick and manage multiple stocks. This is where equity mutual funds can help. Equity mutual funds invest in different stocks, thereby overcoming concentration risks and helping you minimize the downside risks.

The meaning of an equity mutual fund is a scheme that as per the scheme information document invests a minimum of sixty-five per cent of its net assets in equity and equity-related instruments.. It is suitable for investors with a high-risk appetite and a long-term investment horizon. There are different types of equity mutual funds such as categorization as per market capitalization; Large, mid and small cap, categorizing as per styles; value & contra, sectorial/thematic funds, ELSS (Equity Linked Savings Scheme) etc.

The current pandemic has shifted the focus of retail investors towards debt mutual funds. A debt mutual fund, also known as a fixed income fund invests in bonds and other debt securities. It invests in Treasury bills (T-bills), Government securities (G-secs), Debentures, Commercial Paper, Certificates of Deposit and others.

When you compare Equity Funds vs. Debt Fund, equity mutual funds generally have the potential of generating higher returns over the long-term. If you have a long term horizon and have a risk capacity to bear volatility, then an equity mutual fund is for you. However, if you are looking for a short-term horizon of less than three years, then you might consider investing in debt mutual funds that are relatively less volatile and has potential to help you achieve short term goals.

A portfolio mix of equity and debt mutual funds has potential to help to minimize downside risks due to market ups and downs. Last but not the least, a periodical review is needed to ensure that the assets you have invested in are aligned to your intended goals. As you near your financial goals, you may want to have a greater proportion of your portfolio invested in debt mutual funds than in equity mutual funds. Those who are starting to invest and do not have too many financial obligations and to investment for long term may choose to invest a larger portion of their investments in equity mutual funds.

Equity Mutual Funds for long term investing

Equity mutual funds have potential to provide risk-adjusted long term returns. You can choose to invest in equity funds such as diversified equity funds, ELSS (Equity Linked Savings Scheme) or large-cap funds, or even emerging themes in Equity investments such as ESG (Environment, Social and Corporate Governance) equity funds, etc.

The benefits of equity mutual funds include:

Professional fund management: Managed by professional fund managers who research and analyze the performance of various companies, and invest in the stocks that could deliver long term risk-adjusted returns to the investors.

Easy on the wallet:You can invest in equity funds through the SIP (Systematic Investment Plan) mode, wherein you can make weekly, monthly, or quarterly investments as low as Rs. 500.

Power of compounding: Grow your wealth with the power of compounding where your earnings get reinvested and compounds over the long term.

Potential to Cope better with inflation: You need to look for investments that provide more returns than the prevailing inflation rates. Equity has the potential to cope better with inflation in long term ..

Rupee cost averaging: Equity Mutual funds are more volatile than debt mutual funds. Your equity mutual fund is not likely to provide consistent returns during the period you are invested in the fund. Some years you might earn more, while other years you might earn less. SIP in equity fund help to beat the volatility of the equity markets through rupee-cost averaging.

Portfolio diversification: You can achieve portfolio diversification and your investment risk is spread across various stocks when you invest in an equity mutual fund. Thus, even if some stocks in your portfolio underperform, the strong performance of the other stocks would offset some of that risk and help build your investment corpus.

Should you invest in Gold Funds in India

Physical gold such as gold jewelry or gold coins has several drawbacks such as storage in safety vaults and the associated locker charges. They also demand price markups due to the design and making charges. Apart from these, purity issues and lack of flexibility in investment amounts can make buying physical gold inefficient. In contrast, Gold ETFs and Gold Fund of Funds have become popular forms of investment. Gold ETFs have received rising net inflows from investors. The number of folios in Gold ETF surged by almost 10% in June to Rs. 18.32 lakh from Rs. 16.68 lakh in May as per monthly data from AMFI. Another way of investing in Gold digitally and overcoming the drawbacks of investing in physical gold is by investing in gold fund of funds instead.

The meaning of Gold Fund of Funds is an open-ended fund which has an underlying investment in Gold ETFs, that in turn is backed by physical gold and tracks the domestic price of Gold. The NAV is declared at the end of the trading day similar to other mutual funds. One can invest in a Gold Fund of Funds via an SIP, where you can invest a minimum of Rs 500. When comparing gold funds vs gold ETF, one doesn’t need a DEMAT account for investing in a gold fund of funds. The capital gain arising out of redeeming Gold Funds within less than three years is subject to short-term capital gains tax which will be taxed as per Income Tax slabs. For capital gains arising for a holding period of more than three years, then it will be long-term capital gain, which will be taxed at the rate of 20%.

Gold acts as a strategic asset in an investor’s portfolio, given its ability to be an effective risk-reducing portfolio diversifier. It helped alleviate losses for investors who owned them during the pandemic.

With the fall in gold prices in response to the strengthening of the US dollar in Jun 2021 and talks of interest rate tightening as early as CY 2023, investors can consider allocating a portion of their portfolio to Gold.

While selecting a Gold fund of Funds, just like any mutual fund, investors need to analyze the fund based on certain quantitative and qualitative parameters, that one can use to arrive at the best gold funds as per their requirements. Additionally, it would be best if one were to keep their financial goals, risk appetite and investment horizon in mind.

Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video.

Idaho Presents an Extravagant Living Experience

The rate of movers in Idaho has elevated in recent years, the reason being its magnificent robust and mountainous landscape that attracts many people to move into the state and the standard of living. This has also been lending hand in enhancing the tourism in the fourteenth largest state of Idaho. Idaho is located in the pacific northwestern region of the United States of America which was enumerated to the union as the 43rd state on 3rd July, 1890; Boise holds the pride of being the largest as well as the capital city in the State of Idaho.

The state brags itself as the Gem State for the range of gems found here especially the Star Garnet. If you are considering of moving into this state, you must know that it has a population of more than 1.2 million approximately. Before moving to Idaho people must also know about dynamic environment and survival conditions that this place has to offer. It will not be wrong to say that the quality of life people live here is outstanding. The climatic condition is quite favorable here due to the influence of Pacific Ocean which makes it warm and humid for dwellers. Among the eleven western states it appears at the lowest level if measured on the parameters of cost of living including housing, groceries, education, health care and others.

The economy of Idaho is strong and mainly based on agriculture, agriculture based business such as food processing, wood processing, manufacturing, retail, health care and tourism which has raised job opportunities in the state tremendously. 64% of the general fund is dedicated only to education making it the topmost priority. Tax rates are lower for a family living in Idaho when compared with other 30 states.

As mentioned above Idaho is a region full of rocks and mountains which makes this a place to perform lots of outdoor activities like Hiking, mountain biking and mountain climbing for the obvious reason. Fishing, kayaking, skiing in the winter are some of the outdoor thrills that Idaho presents. Boating and hunting are some of the recreational activities particularly along the Snake River.

There is no end to surprises and amazing activities that you can come across in Idaho. Mountain and greenery that surrounds the entire environment gives you the sense of serenity. Silver Mountain and Sun Valley has been the main attraction here since many years. Hence, Idaho is the place to be, where people are offered to live metropolitan lifestyle. On the other hand, it provides calm and relaxed environment similar to a small town. We can say in all ways Idaho serves you an extravagant living experience.

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