Aggressive or cautious: what should mutual fund investors do in 2022?

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Many mutual fund investors, especially new ones in the market, wants aggressive strategies in 2022. Though mutual fund managers and advisors warn caution ahead the new year, many investors want to bet heavily on schemes and themes that have done very well in the past. Mutual fund advisors say they are getting calls from investors- both new and existing – who want to invest in the top performers of 2021, like small cap funds and technology sector funds.

Advisors say some sectors always do better than others, but investors should not base their investment strategy on these tactical calls. The standard advice to investors remain the same: stick to you plan; always choose schemes based on your goals and risk profile.

“Value / Contra funds may do well in expensive and high valuation markets. Greater China region looks lucrative and low priced from the valuations point of view and there immense potential the region has to offer in terms of growth. However, mutual fund investors, especially retail investors need to trust their fund managers and take a diversified approach to investing even in 2022,” says Rushabh Desai, Founder, Rupee With Rushabh Investment Services.

With all the new products coming up in various interesting segments, investors are seeing new opportunities to earn big returns. Many of them forget the risks attached to these investments, say advisors,

Santosh Joseph, Founder, Germinate Wealth Solutions, based in Bangaluru, says that the recent bull run that we saw in 2021 should not cloud your opinion of risk. The correction that we saw in 2021 is not the worst kind. “If you have a portfolio that is in line with your risk appetite, continue with it. If you feel like you are ready to take more risks, think twice. If your ongoing investments are doing well, don’t make changes. If you want to make your portfolio more robust and you can take the risk, add diversified funds to your kitty. For example, small cap funds, international funds etc. Don’t take tactical bets that need constant tweaking and are highly cyclical,” says Santosh Joseph.

If you are a new investor and are getting into the equity market looking at the amazing returns in 2021, you need to be cautious. Mutual fund advisors believe that every time investors come in after a bull run end up exiting in the short term with losses in their portfolio.

“Be it 2022 or any other year, investment ideas for investors should be strictly based on their goals, risk profile, time horizon and asset allocation. Given the strong upwards rally we have seen in equities after the sharp downwards correction in 2020, investors should be cautious from price and valuations perspective in 2022. Don’t take extra risk for extra returns,” says Rushabh Desai.

These advisors believe that the rise in Covid cases across the globe and the new variant of COVID still remain a threat for the equity market. Hence a diversified, long-term strategy is the best suited for retail investors. “Mostly a staggered and SIP approach would be ideal at this point but any decent correction pockets should be used as an opportunity for lump sum investments,” says Rushabh Desai.