Don’t Panic When Your Mutual Funds’ NAVs Are Low

To harness the untameable power of stock markets, you need expert knowledge, shrewdness and an alert-eye to spot opportunities out of the blues. Finding opportunities in equity trades is like hunting for a prey in dark. While hunting, you are aware about all the conditions favorable to catch the prey. The only thing you are doing is waiting for the target to pop out. Once the target pops out of its hiding, you pounce on it and feast over it.

Similarly, stock market players are called as hunters. They can go for days on empty stomach and wait for the opportunity to surface out in the air. Once the opportunity is spotted, they will exploit it to gain significant capital returns. Mutual fund companies or AMCs are comprised of such hunters, who eagerly wait for favorable market conditions and tap the monetization opportunities. At any point of time, mutual fund NAV describes the health of the particular scheme.

NAV is one of the factors, which compel investors to buy or sell the MF units. During troubled times, its value drops, and you may find the mutual fund performance poor. However, troubled financial times do speak out loudly for the lean periods where a hunter spend lean days waiting for his target to surface up. So, whenever the NAVs of your mutual fund investments drop down; do not panic. Instead, hold onto the funds or buy new ones. There is a high probability that you will end up in profit when things become bright and stable.

Besides, MF schemes are not made to harness capital gains in short terms. They are classified as long term investments, which offer almost 20% returns at the time of exit. So, why turn finicky and panic during troubled times when a little patience and perseverance can guarantee positive results in future?

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Different Types of Mutual Funds

Mutual funds have become a preferred choice of investment for ordinary people. The reason for this phenomenon is twofold, it provides for a relatively safe avenue of investment coupled with the tax benefits of the central government. For ordinary people, all mutual funds are one and the same except for their fancy little names. The truth cannot be more different.

Not only are there a wide-range of mutual funds, but also the benefits accrued from each one of them differ significantly.

The most basic difference is the schemes which govern these mutual funds. There are generally two types of schemes-open ended and closed ended. The most fundamental difference between them is that the former do not have any rigid maturity period while the latter do not enjoy the flexibility of an open ended scheme. Hence the key or the USP of an open ended scheme is that it offers discretionary liquidity. It must not be implied that one of these schemes are better than the other. For the close ended schemes, the added benefit is that it enjoys the favor of the finance ministry in the form of tax benefits. Mutual funds falling under the gambit of the closed ended schemes can be traded on the stock exchange. In addition to it, the investors can also sell their units to the mutual funds within a limited liquidity window.

In addition to the above mentioned schemes, there is a new form of mutual funds which is gaining popularity with the investors. It is called interval schemes. The unique feature of this scheme is that it encompasses the benefits of both the open-ended as well as closed-ended schemes. Even the units of this kind of schemes can be traded on the stock market.

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Reason for Good Performance of Top Mutual Funds in India

For an investor of the today, the avenues available to him to invest their hard earned money are multiple. It would not be an exaggeration to say that today’s investors are spoil for choice. They have the traditional way of fixed deposit or the new age mutual fund. The contemporary investor is more educated and cognizant of the market trends than any of their predecessors. This has come at a time when the market is rallying and the fundamentals of the economy seem strong. Indian investors are traditionally classified under the category of “savers”. Also the risk appetite of the Indian populace is not noteworthy.

Hence, with this back drop; mutual funds seem to be a god send gift for the Indian investors. It not only is a considerably safe avenue when compared with equity but also enables the investor to take advantage of the market trends. It’s therefore no surprise that the mutual funds industry has scaled great heights in the relatively small time since it was introduced in the financial markets. In the race to make the most of the market opportunities many well-known fund managers have put up their shop in the country. The investor sentiments is also buoyed by the fact that the sector is highly regulated and therefore considerable secure.

In the market place the following 10 mutual funds have set the floor on fire by their performance.

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