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Navigating Market Volatility: Here are a few mutual fund categories you may add to your investment portfolio

Investing in Mutual Funds During Volatile Times

The ongoing Lok Sabha elections have brought about a high level of volatility in the stock market, leading investors to adopt a cautious approach. In such uncertain times, it is crucial to consider the impact of volatility when deciding on asset allocation for your portfolio. Here are some expert recommendations on mutual fund categories to consider investing in:

Largecap Funds:

Largecap funds invest in stocks of well-established, large companies that tend to be more stable during market downturns. Some top-performing funds in this category include ICICI Prudential, Kotak Bluechip, Mahindra Manulife, and Edelweiss.

Flexicap Funds:

Flexicap funds are dynamic equity funds that invest across various market capitalizations, providing flexibility to the fund manager to adjust exposure based on market conditions. Some top-performing funds in this category are Parag Parikh, Union, Quant, and Franklin.

Diversified mutual funds that span across Large Cap, Mid Cap, Small Cap, and Flexi Cap categories offer a well-rounded strategy, spreading investments across sectors and market capitalizations to mitigate risks and build a resilient portfolio capable of navigating volatile markets.

Debt Funds:

Investors looking for stability and lower risk can opt for debt funds, especially those investing in government securities. While these funds may offer lower returns compared to equity funds, they provide stability to the portfolio.

Hybrid Funds:

Hybrid funds, which offer a mix of equity and debt exposure, can provide stability while participating in the equity market. Balanced Advantage Funds, in particular, are recommended for investors seeking lower volatility while benefiting from equity market returns.

When adding mutual funds to your portfolio during heightened volatility, it is essential to focus on diversification, consider Systematic Investment Plans (SIPs), and maintain a long-term investment horizon. Diversification helps in balancing the impact of market fluctuations, while SIPs spread investment costs over time, reducing the impact of price swings. Long-term investing is crucial for equity mutual funds to withstand market volatility and benefit from long-term growth.

Ultimately, the selection of mutual funds should align with your risk-return objectives and investment time horizon. Market volatility is a part of investing, and investors should be prepared to ride out the ups and downs by staying invested in funds that match their asset allocation. Consider rebalancing your portfolio if market conditions warrant it to maintain your desired asset allocation levels.

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