Beyond basics: Advanced strategies for successful equity fund investing
An equity fund investment can be risky and rewarding since it is subject to market volatility. Investors know how to select an equity mutual fund online by analysing its features and past performance; however, it is also important to strategize one’s investments. This article enlists four advanced strategies that can help the investor manage their equity fund investments by optimising their overall returns.
Four advanced strategies to manage one’s equity fund investments:
Here are four advanced strategies that investors can employ while chasing the objective of earning higher returns through their equity fund investments.
Investors often time the market to increase their equity fund investment returns: Seasoned investors with several years of experience generally employ this strategy. It involves entering or exiting a particular sector of equity funds at the right time. However, this strategy is not very reliable since it depends almost entirely on the investor’s hunch as opposed to logic. The right time to enter or exit an investment is a subjective measure, and investors often end up doing the opposite of what is optimal.
Certain investors employ the “buy and hold” strategy: The “buy and hold” strategy is a very popular investment advice that is also given to more inexperienced investors. This strategy entails buying one’s investments and holding on to them for a long time regardless of market volatility. As the investor weathers market volatility, over time, their gains will outweigh their net losses. This strategy is ideal for long-term investors.
Investors also follow the Performance Weightage strategy to manage their investments: The market timing strategy is completely reliant on the investor’s hunch, and the buy and hold strategy relies more on logic. The Performance Weightage strategy is a mid-way path between these two strategies. It requires the investor to keep revisiting their equity mutual fund portfolio and adjust its mix to optimise returns.
Not following any strategy also counts as an equity mutual fund investment strategy: There is no dearth of strategies that can be found online for investors who invest in equity funds. However, for certain investors, following no strategy is a strategy in itself. Often called the “Wing-it strategy”, this strategy entails that the investor follow no specific plan of investment. This strategy, however, is observed to be less successful since it lacks consistency.
Tip: Use a mutual fund calculator!
One of the best ways to ensure that equity fund investments offer optimal returns is to use a mutual fund returns calculator before investing. These free, online calculators can help investors calculate their total returns at the end of their mutual fund’s term. They can also help investors decide on the ideal tenure and investment amount for their equity fund investment.
Equity fund investments are risky, and hence, managing them requires the investor to follow a robust strategy that helps them earn more. Investors can follow any of the advanced strategies mentioned in this article to grow their equity fund returns over time.
Disclaimer: This article is published in association with Nippon India Mutual Fund and not created by TNM Editorial.