The best investment style for mutual fund after COVID

The best investment style for mutual fund after COVID

In recent weeks, there have been a lot of questions about the post-COVID recovery, and the unstable grounds on which a lot of which debt funds today stand. Additionally, falling returns from a lot of FDs are now making a lot of savers look at debt funds. However, the debt funds are also fraught with liquidity and credit problems, making it problematic. 

There is yet another class of investors that is looking at long term equity investments. Many have now realized that equity investments that are made over long periods, especially those done through SIPs, manage to stay in the positive territory, even during volatile times. This revelation is an eye-opener for many. 

Here is one question that a lot of investors ask. It is about experts recommending a fund in which an investor can invest in a lump sum, and then forget about it for like 20 years. 

This is not a very realistic question. 

But surprisingly, this question is asked often. And the answer to this is really obvious. No investment in the world can be made and then forgotten about for 20 years. And the least of all is one that is based on equity. Forget equity, even if you deposited in the bank, you would have to look occasionally at the bank’s solvency at some of the other time. Twenty years, after all, is a long time. 

There was once a fund manager who held funds with HDFC Bank for 15 years. When asked about it, he replied that he did not hold the funds for 15 years, but 60 quarters instead. Every quarter, when the numbers were realized, he was prepared for some shock, which might force him to sell his holding. Of course, he must not have realistically expected to do so, but he might have been prepared for the same. Though this is a rhetorical statement, it does make some sense. 

The question about forgetting about investment for 20 years is also hopefully a rhetorical one. The term two decades is just a metaphor for a long time. This is a sentiment that experts do endorse. While lump-sum investments and invest-it-forget-it are out of the league, investing over the long term is definitely in. 

You will have to choose a set of funds, begin your SIPs and then not stop. The coming months are a good time to start. Irrespective of the excitement that we see, businesses will have a bad time for a long time to come. This means that you can invest at low NAVs, and build the base for a good return later on. And this is the very foundation that you will need for the future. 

Good funds turning bad, and bad funds turning good has happened a lot in the past, and will happen in the future too. So while investing for 20 years is great, it is advisable only in SIPs; with of course no question of forgetting about anything.