Here is how you can protect your mutual funds portfolio in the downturn and volatile market

Is there anyone who has not heard of mutual funds and SIPs? Or has not come across the campaign ‘Mutual Funds Sahi Hai’? A mutual fund is always recommended as one of the best ways of investment if someone wants to put in his money in security markets so as to gain reap healthy returns.

The Indian mutual fund space has witnessed an expansion amid the Covid-19 pandemic. Top fund houses have registered growth in the range of 8-16 this year in their assets under management (AUM).

Indian mutual funds market AUM has recently crossed over Rs 36 lakh crores. Average Assets Under Management (AAUM) of the Indian mutual fund industry for the month of August 2021 stood at Rs 36,09,471 crore. Assets Under Management (AUM) of the Indian Mutual Fund Industry as on August 31, 2021 stood at Rs 36,59,445 crore.

The Mutual Fund segment as an investment arena has seen a great rally in the past 1.5 years. Noteworthy, there are mutual funds that have given more than 100% returns in this rally.

Now, when Nifty is approaching the 18,000 level and Sensex has already breached the 60,000 mark for the first time ever, there is a fear of losing previous returns. Mutual funds/SIPs investors have a valid concern in the mind – To stay invested in the market or not.

Here are some techniques you can follow in such high volatile market.

1. Rebalance portfolio with Dynamic Asset Allocation (Balanced Advantage) Funds: Dynamic Asset helps reduce downside risk by diversifying your investments. It tracks the performance of all asset classes and reduces allocation from overvalued assets, and allocates at the time of reasonable pricing.

2. Invest through SIP mode: The SIP method helps you to buy more units when the market is down, which helps in averaging the price.

3. Invest through STP instead of Lump sum: If you want to invest in the market with a lump sum mode, it’s always preferred to invest through the Systematic Transfer Plan (STP) model. Through STP, your funds are parked in the debt market and invest in the equity market in some installments, which helps to beat volatility.

4. Stay invested in Goal-Oriented Investment: If you have invested your money for the long term, which is linked to any goal and its investment period is more than 10 years, you can stay invested in it, because irrespective of market level, the equity market has never given negative returns in 10 years.

The MF Industry’s AUM had crossed the milestone of Rs 10 lakh crore for the first time in May 2014 and in a short span of about three years, the AUM size had increased more than two folds and crossed Rs 20 lakh crore for the first time in August 2017. The AUM size crossed Rs 30 lakh crore for the first time in November 2020.

The mutual fund industry had crossed a milestone of 10 crore folios during the month of May 2021.

The total number of accounts (or folios as per mutual fund parlance) as on August 31, 2021, stood at 10.86 crore (108.6 million), while the number of folios under equity, hybrid and solution oriented schemes, wherein the maximum investment is from retail segment stood at about 8.95 crore (89.5 million).

(The author is the Vice-Chairman of GCL Securities Limited. Views expressed are personal.)