Home Discover Journals Do not stop investing in mutual funds during a market dip. Here's why

Do not stop investing in mutual funds during a market dip. Here's why

By Finserv MARKETS - Aug 26,2019
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Do not stop investing in mutual funds during a market dip. Here's why

Investment markets are usually described as being either bulls or bears market. These terms originate from the manner in which these animals attack their opponents. A bull market refers to a situation where the market is performing well, since the bull usually thrusts its horns up into the air. Alternatively, a bears market refers to when the market is down since the bear swipes its paws downwards while attacking its opponent.

Markets, especially dealing in equity funds, usually fluctuate on the basis of several factors including economic and political stability both regionally and globally. However, mutual funds have emerged as the best investment plan owing to their ability to generate returns for investors even when the market is down. Since mutual funds allow investors to diversify their portfolio by investing across a bouquet of funds, the top mutual funds usually are able to generate profitable returns even during a bearish market.

When markets dip, the general sentiment among investors and usually displayed by new investors, is to panic. In the immediate aftermath of the market dipping, most investors choose to sell their shares and exit the market in a bid to avoid a worse situation. However, this is also the ideal time to buy stocks since the market is on a dip, premium stocks are available at much lower prices than if the market were doing well.

Top mutual funds are a good idea in which to keep investing during a market dip. Since mutual funds include a diverse portfolio of funds, you can afford to buy more units of a stock when the market is in a dip as opposed to when it’s on a high. If you invest in mutual funds through Finserv MARKETS, you can also get access to a wide plethora of top mutual funds based on your requirements and goals. You can either choose to appoint a fund manager who takes decisions on your behalf as to how the money could be invested or you can choose to take your own investment decisions and avoid paying commission fees. When you begin investing in mutual funds on Finserv MARKETS, you can open up your account for free by submitting a few KYC documents and get insight into exemplary market feedback, that allows you to more more informed decision making.

There are mutual funds that are designed to generate returns for investors when the market is on a dip. Reverse market funds are an option available to investors which are designed to generate returns during a market dip. These top mutual funds come in two types, namely, reverse index and actively managed.

Read on to learn about the best investment plans available to you during a market dip.

  1. Reverse Index:

These funds are the best investment plan to stay ahead of the market curve, in case of a dip. It tracks the performance of a benchmark index, and pays returns when the index it follows dips. For instance, if the index drops by 2%, the mutual fund’s net asset value (NAV) would rise 2%. Some funds would even pay a multiple, which magnifies its impact. For instance, if you invest in a fund that pays double the decline and the fund itself drops by 10%, the fund and investors could earn 20%.
Such funds allow you to take an inverse position on the market, and earn even when the markets are in a bearish state. This is a good option for broadening your portfolio, and will allow you to hedge your investments against any kinds of market conditions. If your portfolio contains too many shares of the same index, you could consider investing in a reverse index fund at the same time so as to be protected in case of a dip in the market.

2. Actively Managed Funds:

Actively managed mutual funds are usually run by a fund manager, who actively works towards outperforming market returns. During a bearish market, the fund manager would actively study the market and invest in funds that are performing better than the market average. They could invest in funds for the long-term as well as for the short-term during this time, based on the returns they are looking to gain for investors. Investing in mutual funds on Finserv MARKETS allows you to benefit from the knowledge of experienced professionals who actively work towards guaranteeing the best returns to investors.

A market dip is the best time to pick up shares that would be otherwise unaffordable, at a lower net asset value (NAV). This will allow you to gain from these mutual funds in a longer time frame, and their capital appreciation over the period will allow you to build a corpus for your long-term plans, such as retirement. When you open an account on Finserv MARKETS, you get access to detailed information regarding not just your portfolio but also the market as a whole. This will allow you to take decisions on how you want to invest, and the securities in which you wish to invest. If you invest in a Direct Investment Plan (DIP), you can avail 0% commission fees whereas opting for a fund manager will ensure that a qualified professional is at all times dedicated to generating the best returns for your fund.

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