Diversified funds in India are often regarded as
quality investment additions to financial portfolios. Should you invest in diversified
equity funds in India and other similar types such as multi cap funds? These
funds owe their importance to the time tested golden investment principle that
states do not put all your eggs in one
basket. This equates to the need for not putting your entire investment
corpus into a single type of investment. Risks should be spread out and
diversified with investments made in several assets and throughout diverse
business sectors/industries. Mutual funds enable diversification very naturally
through ensuring access to several business sectors and companies alike though
these entities may be from one sector. Hence, these funds come with diversified
options that spread throughout market capitalizations and business sectors as
well. You can consider diversified equity funds in India for investing in
accomplishing financial goals for the long term.
Diversified funds in India are those which
are often called multi cap funds,
i.e. those which invest in various business sectors and market capitalizations.
Diversification takes place with several mutual funds being present within the
portfolio. This enables reduction of overall risks while helping in cushioning
negative impact of performance of some mutual funds/securities within the
portfolio as well. The main objective behind diversification is safeguarding returns
from the portfolio in the context of extreme market fluctuations and other
volatile circumstances. Several mutual fund houses offer diversified funds
which may fall in any category. By deploying an investment in a single fund,
investors get the advantage of investing in multiple securities which are
spread throughout diverse market capitalization levels and business
sectors/industries alike. These funds are still impacted by market volatility
levels although the impact is lower as compared to funds concentrating on one
market capitalization or pure sector funds.
Learning
more about diversified mutual funds
These funds will help you mitigate risks better than
many other categories such as small cap or mid cap funds. Fund managers of
these funds will periodically make the switch between small, mid and large cap
stocks on the basis of market conditions. This will make sure that you can cash
in on better opportunities present in the market. Returns are suitably
amplified from these funds since they deploy investments in companies across
varied market capitalizations. Hence, investors can expect sizable growth
prospects for the future in spite of the diversified funds not being totally
safeguarded from market uncertainty.
Investors also get relatively broader exposure to
the market with these funds. Multi cap funds are diversified
funds since they invest throughout market capitalizations while saving time for
investors greatly. The risks are more balanced when it comes to these kinds of
funds. This happens since small cap funds do well in a bullish market while
large cap funds work as support in case of a falling market. Those who
relatively understand equity markets and their risks and those who have
moderate appetite for taking risks, may consider investments in these
diversified funds accordingly.
