Choppy markets are tricky to understand & handle. Since we cannot predict which direction the markets are headed, we sometimes end up making bad/impulsive investing decisions. Read this article to know more on how you can convert volatility into an opportunity. In this article we talk about how to handle your mutual fund investments during choppy markets. One thing to understand during such phase is that a fundamentally strong investment will bounce back in the future & should be held on to during these times. A careful study of your investing picks, be it stocks or mutual funds can actually turn volatility into an opportunity. Now the question arises how to identify such investments. Lets talk about mutual funds first.

Mutual funds with strong past track records

Mutual fund schemes with strong & consistent past track record, robust portfolio picks, large AUM base can be a good buys during such phase. Look out for funds that  predominantly invest in large cap companies as these are fundamentally strong companies experiencing some bearish trends and may be available at attractive prices. It would a smart move to buy them during such phases. 

Continue your SIPs

Stay invested in your existing SIPs. During volatile markets, investors in SIP generally tend to gain as they continue to accumulate units at lower prices, resulting in better ROI. Picking Flexi/Multi cap funds which invest in a mix of large, mids & small cap funds can also be lucrative during this phase. 

Study before starting any new investments 

Don’t forget to study some basics of the scheme before investing. 

1.  Study the schemes historical performance

2.  Statistical details like standard deviation – which indicates how volatile the scheme performance has been

3. ALPHA – indicating how the scheme has performed vis a vis the benchmark

4. SHARPE ratio – indicating how much risk the fund manager assumed to earn its returns. 

Remember that these ratios cannot be viewed independently & have to be compared with benchmark ratios or peer fund ratios for the correct conclusion.

 Stay tuned as we bring part 2 of this series which discusses equity investments during choppy times. Until then, Happy Learning & Happy Investing !!!