Diversification is important when it comes to investing in mutual funds or equities directly. This is exactly what diversified mutual funds are for – to minimize the work of an investor in terms of rigorous analysis and choosing the best stocks to invest in.
Read on to know what are diversified mutual funds, 9 diversified mutual funds you may invest in, benefits, and things to consider before investing in diversified mutual funds.
Diversified mutual funds are multi-cap equity funds that invest in many sectors and companies to increase diversification while maximizing returns. Depending on the allocation that each diversified mutual fund has, these vary in terms of their risk nature. In turn, depending on the risk nature, their returns vary as well. With a lot of diversified mutual funds available, it’s crucial to analyze all factors and choose the one that works best for you.
|Fund Name||1 Year Returns (in %)||Net Assets (in crores)|
|PGIM India Diversified Equity Fund||24.9||INR 3,302|
|Parag Parikh Long Term Equity Fund||28.5||INR 19,933|
|Mahindra Badhat Yojana||31.9||INR 919|
|Baroda Pioneer Multi-Cap Fund||29.2||INR 1,182|
|UTI Equity Fund||14.2||INR 25,541|
|DSP BlackRock Equity Fund||14.6||INR 7,656|
|Canara Robeco Equity Diversified||18.5||INR 6,598|
|Principal Multi Cap Growth Fund||28.6||INR 1,754|
|BNP Paribas Multi Cap Fund||25.9||INR 590|
Expected return rate (p.a)
Time Period (Years)
The first and foremost advantage is the diversification of the investment portfolio. Diversified mutual funds eliminate the need for the investors to analyze different stocks and carefully choose securities to increase diversification. With securities that are highly diversified across various sectors and regions, these mutual funds maximise returns and improve your portfolio.
Equity funds are always known for their huge returns, owing to their high-risk nature. Carefully investing in stocks that are performing really well in the markets leads to greater capital gains despite the high volatility of the markets. Investors with a high risk appetite can benefit from diversified mutual funds.
Diversified mutual funds are beneficial for investors. But, you must check if this kind of investment is for you. Let’s find out who can invest in diversified mutual funds in the next section.
Diversified mutual funds are perfect for investors who have invested in hybrid funds and debt funds. Beginners could get overwhelmed with the number of returns and the risk involved. And, it is not advisable to invest based on emotions. Analyzing the market trends, stocks in which the fund invests, and growth potential need to be understood. First-time investors are advised to stick to hybrid funds, value funds, and aggressive growth funds before moving on to diversified equity mutual funds.
If you are a seasoned investor, here are a few points to consider.
Analyze your investment goals first. These goals may vary from investor to investor, depending on the financial objectives. It is important not to let what one investor does affect your choice. Diversified equity mutual funds are for people who are willing to take high risks to gain very high rewards. While the bull markets gain significant returns, the bear markets affect your portfolio negatively. Analyzing market trends and having long-term investment plans will help you navigate through this carefully.
Diversified mutual funds invest in equities. This implies that the performance of these funds are volatile and heavily impacted by market conditions. While these funds generate huge returns in economic upswings, they can suffer significant losses in downturns. Diversified mutual funds are for investors with a high-risk appetite.
Analyzing the fund performances helps investors to choose the right funds and invest wisely. Past performances give an idea of whether the funds were able to live up to their objectives. This, in turn, helps in gauging how the funds will perform in the future. Comparing the chosen fund performance to other similar funds in the market will also give the investors better clarity.
Fund houses collect a fee from investors to handle the administrative expenses, called the expense ratio. This is usually a small percentage of a scheme’s total assets and varies from one fund to another. But it’s important to analyze before investing in equity funds. While the ratio may seem small, it might be huge in absolute monetary terms. You can save a lot of money by evaluating your options.
Since diversified mutual funds are equity funds, their tax structure is of equity funds’.
The capital gains earned on exit within 1 year are treated as Short Term Capital Gains (STCG) and are taxed at 15 per cent.
If an investor holds investments for more than a year, the gains are classified as Long Term Capital Gains (LTCG) and are free if the profits fall under ₹ 1 Lakh, but taxed at 10 per cent if the gains exceed ₹ 1 Lakh.
If you are a seasoned investor, investing in diversified mutual funds will help diversify your portfolio and may be rewarded with huge returns. Bear in mind that mutual funds are subject to market risks and make sure to read all the scheme related documents very carefully. Analyzing similar diversified mutual funds offered by various fund houses can help in finding the right one for you. With Navi Mutual Funds, you can now invest in diversified mutual funds in one tap!
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Disclaimer: Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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