A Whole is Greater Than the Sum of its Parts

PersonalFN

We do have multiple goals, but do we have multiple investments?

Combinations are more productive and beneficial than breaking something up into individual parts, as we saw in the preceding examples.
When it comes to making investments, many people have a lot of questions that run through their heads and become confused about what, where, and how to invest.

 

Success And Failure Are Always Cyclical

A person looking to invest in a fund based on its performance in the previous year would do well to keep in mind the chart below, which shows that the top-performing fund from the previous year is not necessarily going to be the top-performing fund from the coming year.

There are so many possible combinations for investment

The majority of investors aim to make investments that provide them with extremely high returns as soon as possible without having to worry about losing their original investment (Principal amount). 

Due to this, many people are constantly searching for the best investment strategies that will allow them to grow their money in a short period of time while posing little to no risk.

Because of the constant volatility of the financial market and the fact that its future cannot be accurately predicted due to the presence of a wide variety of conditions and scenarios, each fund has its moment in the spotlight.

The above chart shows the current year performance of Nifty 100 (Large Cap), Nifty Midcap 150 (Mid Cap) and Nifty Small cap 250 (Small Cap) from 2012 – 2021.

Nifty 100 (Large Cap Performance)

The Nifty 100’s growth performance in 2012 was unsatisfactory, but in 2013, it was the best of all funds. For the past two years (2014 and 2015), the fund’s performance has been dissatisfactory. It did slightly improve in 2016 before declining once again to its worst performance in the year 2017. It maintained its position at the top for the years 2018 and 2019, but it continued to be the worst-performing fund for the years 2020 and 2021.

Nifty Midcap 150 (Mid Cap Performance)

Analysis of the performance fluctuations shows that the Nifty Midcap 150 generated alpha in 2012, but from 2013 to 2015, its growth performance fluctuated between the worst and best. It rose to the top once more in 2016; however, from 2017 until 2021, its growth performance remained in the middle.

Nifty Small-cap 250 (Small Cap Performance)

The growth performance of this fund was moderate in 2012, it declined in 2013, but it continued to be the best-performing fund for the next two years (2014 and 2015). Its performance was at its lowest in 2016, at its highest in 2017, and at its worst again in 2018 and 2019. The performance of this fund was outstanding for the years 2020 and 2021.

Before making any investments, there is always the question of which type of mutual fund one should put their money into. This can be a very difficult choice. Which type of mutual fund is best for you: those catering to large, medium, or small caps; multi-cap; or sectoral funds? It is important to understand that each category has advantages and disadvantages of its own.

“A Whole is Greater Than the Sum of Its Parts”

Funds that fall into other categories, such as large-cap, mid-cap, small-cap, and multi-cap, are subject to restriction mandates and are required to maintain a focus on the companies that are represented in their portfolios. A large-cap fund, for example, will be unable to invest in mid and small-cap stocks, even if the valuations in these markets appear attractive.

Similarly, a mid-cap fund must remain invested in mid- and small-cap stocks even when the market underperforms. Multi-cap funds are the superior option for an investor in this situation.

Since multi-cap funds are able to capitalize on investment opportunities across the market, they are typically considered to be better wealth creators than other categories of funds over the fund’s entire investment horizon.

Also, the long-term returns of the multi-cap category are similar to those of the mid-cap category, but with less volatility.

A Combination gives you a smoother path

Since multi-cap funds are able to capitalize on investment opportunities across the market, they are typically considered to be better wealth creators than other categories of funds over the fund’s entire investment horizon.

Also, the long-term returns of the multi-cap category are similar to those of the mid-cap category, but with less volatility.

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Performance Evaluation of ₹100 Invested in the Current Year Best Performing Funds

Why should one choose Multi Cap fund

Investment strategy that is well-rounded.

Investment ideas combined across the earnings cycle.

Flexible portfolio construction in terms of market cap.

Each component contributes to a better risk-reward balance.

Portfolio diversification.

The best parts of each segment are put together in a composite, which could make a portfolio more stable.

Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.

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