Riding the Market Wave: Strategies to Make the Most of Rising Markets

India’s stock market is riding in full swing breaking its all-time highs. Riding the market wave are the equity-linked mutual funds. Many investors avoid investing in such bull markets thinking they might get mutual fund units at a higher NAV. But there is no right or wrong time to invest. It depends on what investing strategy you adopt in what type of market cycle.

What is investment strategy?

When you invest, you put your money with an aim to get a desired outcome over a certain period. An investment strategy is a set of base frameworks created to invest in different types of mutual funds with an aim to achieve the goal. Your goal can be short term or long term, capital appreciation or income generation.

Depending on what you seek to achieve from your investment, you choose the mutual fund whose objectives align with your goals. Mutual funds use different investment strategies and strive to earn returns as per the fund objective.

Investing strategies for rising market

The investment world has a plethora of assets that react differently to a market environment. When we talk about a bull run, equity is high and going higher. Here are three investing strategies different types of mutual funds use to make the most of rising markets.

Rebalancing and reinvesting

The instant reaction to a market high is to redeem from your equity funds and reinvest that money in less volatile assets classes that are currently undervalued.

The Aditya Birla Sun Life Balance Advantage Fund uses this investing strategy in a bull market. It dynamically rebalances your portfolio between equity and debt. It periodically assess the fund’s allocation and shifts money from whichever asset class is overvalued at that time and reinvests that money in the other class which is undervalued, thereby compounding returns. With this rebalancing and reinvesting strategy, the fund aims to generate long term growth of capital and income distribution with relatively lower volatility.

Active Investing

One of the ways to make the most from a rising market is to enter early, and redeem when equity becomes overvalued. While earning returns is important, it is also important to let go of loss-making funds instead of holding on to them. You would be better off investing that money in other securities that are in a growth momentum. This strategy of active investing is risky and one needs to be well-versed with the markets.

Aditya Birla Sun Life Flexi Cap Fund actively invests across large, mid, and small cap stocks depending on the market with an aim to generate long term capital growth. Its flexibility to allocate funds across market caps enables it to manage investments through all rising and falling markets.

The above two strategies of rebalancing and active investing enhance returns in a bull market. But the next two strategies we will discuss work across all market cycles.

Investing in blue-chip

In a rising market, all types of stocks with potential grow with the wave. But when the rally ends, not all stocks can sustain their growth. Small-cap stocks tend to decline when market conditions become tough. But blue-chip companies have the potential to thrive in rising markets and sustain in difficult markets. These are the type of stocks are comparatively less volatile than small-cap stocks and generate market-linked returns.

Aditya Birla Sun Life Large Cap Fund invests majorly in large-cap stocks across industries and a small portion in mid-cap stocks with an aim to generate wealth in the long term. As these large caps have a larger share of the market, they benefit when the overall market rises. With maximum equity exposure, the fund can help you make the most of the bull market.

Diversification

An investing strategy that applies in every market cycle is diversification. You can diversify your investments across different sectors, market caps (large, mid, small), and asset classes to make the most of a bullish rally in any asset class.

Aditya Birla Sun Life Multi Asset Allocation Fund diversifies your investments across three asset classes – equity, debt, and commodities like gold – at the same time. A well-diversified portfolio of uncorrelated assets help you invest early in the growth and make the most of the equity portion of the portfolio.

Reference:

https://kriptomat.io/finance-investing/bull-market-strategies/
https://www.ig.com/au/trading-strategies/how-to-trade-and-invest-in-a-bull-market--top-5-strategies-210728#:~:text=A%20popular%20strategy%20in%20bull,to%20buy%20the%20call%20option

Scheme Name	This product is suitable for investors who are seeking*	Risk-o-Meter	Benchmark Risk-o-Meter
Aditya Birla Sun Life Large Cap Fund (An open ended equity scheme predominantly investing in large cap stocks)	Long term capital growth Investments in equity and equity related securities, diversified across various industries in line with the benchmark index, NIFTY 100 TRI
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Scheme Name	This product is suitable for investors who are seeking*	Risk-o-Meter	Benchmark Risk-o-Meter
Aditya Birla Sun Life Balanced Advantage Fund (An open ended Dynamic Asset Allocation fund)	Capital appreciation and regular income in the long term Investment in equity & equity related securities as well as fixed income securities (Debt & Money Market securities)
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Scheme Name	This product is suitable for investors who are seeking*	Risk-o-Meter	Benchmark Risk-o-Meter
Aditya Birla Sun Life Multi Asset Allocation Fund (An open ended scheme investing in Equity, Debt and Commodities)	Long term Capital Appreciation Investment in equity and equity related securities, debt & money market instruments and Commodities
*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

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