THESE 4 mutual fund categories are the right fit when markets wobble. Check list here

When benchmark indices—the Nifty50 and the Sensex—have started to spike after being on a long downward spiral, retail investors are thinking hard about the fund categories they should invest in.

The Nifty 50 index recorded a 1,850-point rally in the last six straight sessions while the BSE Sensex touched an intraday high of 79,824, logging a 6,000-point rise in six successive sessions. 

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So, where should investors invest now, and which categories promise high returns in the near future? These are some of the categories of mutual funds wherein wealth advisors recommend investing:

I. Balanced advantage fund: These are the funds wherein investment in equity or debt is managed dynamically (0 to 100 per cent in equity and equity-related instruments and 0 to 100 per cent in debt instruments). “These schemes have the flexibility to move their portfolio between 0 per cent and 100 per cent equity and debt, allowing them to capitalise on changing market environments,” said Preeti Zende, founder of Apna Dhan Financial Services.

“Risk-averse investors with a long-term investment horizon could consider investing in balanced advantage funds for such core allocation, as these funds look to manage risks by dynamically managing equity allocation based on the market valuations. Moreover, such core portfolio allocation decisions should be agnostic to short-term movements in the market,” said Nilesh D Naik, Head of Investment Products, Share.Market, PhonePe Wealth.

II. Multiasset fund: These refer to the funds which make investments in at least three asset classes with a minimum allocation of at least 10 per cent in each asset class. “These funds aim to provide diversification, reduce risk, and potentially improve returns by a fund manager’s tactical asset allocation based on market conditions,” adds Zende.

III. Aggressive hybrid fund: These refer to schemes that invest 65 per cent to 80 per cent in equity and equity-related instruments and 20 to 35 per cent in debt instruments.

“Investors who can bear the volatility to some extent but also want some kind of downside protection can invest in aggressive hybrid funds that invest in both stocks (equities) and fixed-income securities (debt) with a higher allocation to equities, typically 65-80 per cent, and a smaller allocation to debt, 20-35 per cent,” says Zende.

IV. Other categories: During volatility, wealth advisors recommend that investors explore investing in large and flexi cap mutual funds as well. “Funds from categories such as flexi cap, large cap, large & mid-cap and value are ideal for inclusion in the core portfolio,” advises Nilesh D Naik of Share.Market.

Stick to the plan

Meanwhile, some believe that it is insignificant which fund you opt for; what is important is the ability to stick to a plan that can help you ride through the storm. Harsh Gahlaut, Co-founder and CEO of FinEdge, for instance, argues that instead of reacting to volatility by chasing the right category, investors should anchor their choices to their long-term goals.

“One-size-fits-all investing doesn’t work. What does is personalisation, conviction, and behavioural alignment. The real differentiator isn’t the fund you choose during a volatile phase — it’s your ability to stick to a plan built around your goals. If market swings are unsettling you, it’s likely a signal to revisit your ‘why’ — not your portfolio,” he explains.

Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment-related decision. 

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