We know people lose their money when the stock market starts to rumble up. The prices of shares go up and down and it becomes a situation of chaos. In such cases, the dynamic equity found is found to be very much effective. The dynamic funds mean the fund which dynamically manages its equity portfolio. In simple words, invest more when the market is down and less when the market is up. One of the most common mistakes an investor makes is they invest more when the market is booming. When the situation changes the portfolios of these investors take a big hit. On the contrary, investors stay away from the market when the stocks are cheap. However, you can avoid these bumps with easy tips. Here are the things you should do to avoid the hard hits of equities.
SIPs better than the Lump sum
When there is Bull Run in the market, investors pour the money in the form of lump sum amount. As a result of that, you won’t be getting the benefits of averaging down your cost of purchase. Instead, investing through SIP is beneficial as you will get reasonably good returns in next few years.
Say no to sector funds
When the market is up, avoid investing in sector fund. The sector funds have a bad history of facing huge loss; people faced loss in technologies during the 90s, loss in real estate, infrastructure during ’07. These sorts of funds are a bit riskier to invest money in it.
Keep different options available
Maintain a balance between asset classes and equity funds. Sell the asset class if they are outperformed your expectations or invest more in assets that have underperformed. Using a dynamic equity fund can be another option. The dynamic equity funds will reduce the equity exposure when the market is up and will increase it when the market goes down. Another big aspect of this fund is it takes out the emotions like fear and greed which hampers our investment. It gives the investor a lot smoother ride.
NFOs are not cheap
Avoiding NFOs i.e. new fund offers is important for investors. When there is Bull Run in the market, the fund houses try to raise their funds with the help of NFOs, by taking advantage of sentiments of investors. As a matter of fact not too many sector fund NFOs are found to be hit, plus SEBI has become stricter about permitting NFOs. The best option to this is stick to open-end funds where you will be able to see fund’s track record.
The stock market is full of uncertainty; these stated tips can help you avoid the potential loss. That being said Axis Dynamic Equity fund, can be a great option to go for. With a dynamic equity fund you can expect for profit. It will save a lot and will bring you better returns.