Looking to invest? Hybrid and multi-asset funds are your best bet

Source: Business Standard

3 min read Last Updated : Oct 11 2024 | 10:01 AM IST

Although India’s overall economic indicators look solid, stock valuations are currently not cheap, which means investors need to adopt a smart approach, favoring hybrid and multi-asset allocation schemes that can adjust exposure to various asset classes as needed, said ICICI Prudential Mutual Fund. in a note.

Focus on Key Sectors

Investment analysts at ICICI Prudential are optimistic about sectors that cater to domestic demand, such as automobiles, cement, and telecommunications. These industries are well-positioned to benefit from ongoing economic growth.

Most of the sectors trade at a premium to their historical average

In addition, consumption is a potential area of opportunity. Financials, insurance, and consumer staples are particularly appealing sectors for investors right now, the note added.

Recommendations for Investors

For new investors looking to make lump-sum investments, ICICI Prudential recommends hybrid funds, fund-of-funds (FOF), and multi-asset allocation schemes. These investment vehicles offer the flexibility to shift between equity and other attractive asset classes, depending on market conditions.

“Fragile Global macros and valuations not being cheap may result in dynamic market cycles, invest in hybrid schemes with multiple and dynamic asset allocation..India’s long term structural story continues to remain intact, invest in flexible mandate schemes” it said.

Staying Alert to Market Influences

Investors are advised to remain vigilant about global events that could affect equity markets. Key factors to watch include geopolitical developments, central bank decisions, and the performance trajectory of Indian equities.

India’s economic outlook remains positive, supported by strong consumption and infrastructure growth. While the current market may seem expensive, adopting a diversified investment strategy can navigate the complexities and seize opportunities.

How should you plan your asset allocation?

“You should start considering asset allocation after you’ve built a substantial amount, such as five years’ worth of savings. Early on, you don’t have much to lose, so focus on growing your wealth. Once you’ve accumulated a meaningful corpus, then it’s time to think about asset allocation to protect your wealth.

The advantage of asset allocation is that it allows you to course-correct and gives you control. If the market dips, you’ll have a plan to invest instead of regretting being fully invested in equity without a strategy. Essentially, asset allocation provides a logical framework for action,” said Dhirendra Kumar of Value Research.

Kumar further explained that if an investor has sufficient time in hand, he can continue with even a 100% equity portfolio.

“As your retirement goal approaches, it’s wise to gradually reduce your risk by shifting a portion of your investments into debt instruments. As for your FDs, they should definitely be factored into your overall debt allocation.,” said Kumar.

First Published: Oct 11 2024 | 10:01 AM IST

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