Aditya Birla Sun Life Mutual Fund

How to take advantage of the bullish market

Feb 25, 2018
3 mins | Views 349

It’s the time of the Bull Run in the Indian financial markets.

There is optimism in the air. Investors are ready to invest in the equities.

Here are five things you may do to make best of the bull run:

  • Invest in equity funds with a long-time horizon

    Bull market is usually characterised by a general optimism among the investors for the future. So, investing in equity funds for long may be a good idea. Expert fund managers are likely to know how to manoeuvre through such market conditions.

  • Stagger investments

    Consider investing through a systematic investment plan (SIP) in mutual funds. This seeks to help you from market fluctuations and volatility. New investors may gain from falling prices by staggering their investments. This allows you to buy at low prices when the opportunity arises. For example, when there is market correction expected, a Systematic Investment Plan (SIP) at such times could help you invest at different market prices, allowing you to average your cost.

  • Large-cap diversified funds

    People may consider investing more in mid and small-cap funds when the markets are doing well. But remember, the price can fall as much as they can rise. So, you may seek to include large-cap funds in your portfolio. They tend to be less volatile than mid- and small-cap assets.

  • Consider Exchange Traded Funds (ETFs)

    You could consider investing in exchange-traded funds (ETFs). An ETF, or exchange traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund.

    They trade like live stocks but investing in ETFs could have extra benefits since the transaction costs and operating expenses are low. Keep in mind that they aim to mirror the performance of benchmark indices. So, an ETF provides about the same returns as the index.

  • Avoid penny stocks

    Bull runs possibly encourage investors to consider all kinds of options. Chasing penny stocks is one such example. Many investors assume that investing in a stock priced at Rs 5 is less risky than one priced at Rs 5000. But it is important to consider risk in percentage terms. A stock worth Rs 5 may be more likely to crash by 20% than a high-value stock. So, invest in stocks based on their fundamentals. Avoid investing based on sentiment or prices.

The bottom line

“Be fearful when others are greedy and greedy when others are fearful,” is a suggestion to investors. A bull run is a time when investors get ambitious. Yes, the markets are doing well, but proceed with caution to earn potential returns.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.

 

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