Equities rock, but bonds are reliable. Investors waking up to falling markets are a worried lot, but data on mutual fund performance underlines a basic maxim of the markets: In troubled times, fixed-income bonds provide much-needed stability. Those who had put their funds in funds that mixed equities with bonds are finding a welcome cushion in the volatile market.
While the NAVs of balanced funds or funds that have a mix of bonds and equities in their portfolios have recorded an average fall of 15 per cent over the past three months, those of equity-based diversified funds have declined by 21.73 per cent, according to data available at valueresearchonline.com.
Mutual fund investors should ideally grab this opportunity to buy units of quality funds, so as to help them lower the cost of their investments, say market experts.
“Please use this opportunity to invest in the mutual funds in a scattered way. Do not invest in sector-specific funds or thematic funds at this time. Invest in equity-based diversified funds, which are likely to make most of the rally, once the markets resume their upward run,” said Gopal Agarwal, CIO of Mirae Asset Management.
According to the data available on mutualfundsindia.com website, since February, NAVs of top-ranking balanced funds have shown a drop of 8 per cent to 21 per cent. While LIC Plan C (Growth) fund lost 21.9 per cent in the three-month period, HDFC balanced fund (growth) recorded least of the losses at 8.24 per cent.
“In general interest rates have moved up. However, the spread between AAA bonds and ten-year bonds have widened. To that extent, though not substantial, balanced fund portfolios could have taken a hit,” said a manager at a domestic fund.
Though existing fund schemes with a proven track record are advisable in a rising market, in a market that is close to its bottom, new fund offers could be a better option as they will be in a position to use the entire corpus to pick up stocks at lower levels.