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Mutual Funds - Should you invest in equity diversified funds?

19 May 2004

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Who wouldn't want to earn few bucks more through stock market investments but give a thought to the high risk it entails and one would have to think more than twice of taking the plunge.

Fret not. If equities are your forte how about taking the mutual fund route?

The ups and downs of the stock market can leave you poorer not to mention the mental anguish that could follow on losing your hard earned money reason why most small investors prefer the mutual fund route to stock market investing.

Mutual funds offer several avenues to park funds even for those with not-so-deep pockets and the best part is, the risk is limited.

But if you are looking for stock market related returns and you thought you could invest in equity diversified funds and rest assured, think twice.

In March, the BSE sensex delivered 70.48% returns during a years time and the equity diversified category gave 106.02% return over a one year period - highest in the mutual fund category. When compared with other fund types the equity diversified schemes are said to have outperformed every other. Comparatively the debt funds, considered to be more safe faced high volatility and performed poorly.

No doubt the mutual fund route spreads the risk inherent in direct investment in stocks but consider the performance of equity funds during the recent past.

The equity-diversified category delivered a negative return and equity funds that invested mainly in the FMCF category also delivered a negative return of 8.27 percent. In other words, investors shifted their preference from debt to equity. But this is not to scare you from investing in equities.

Being highly volatile in nature equity funds are definitely a high risk category. But you can be happy that you are playing safe with minimum risk

Source: dwt BACK