Page 49 - mutual-fund-insight - Mar 2021_Neat

Lack of mid/small-cap ETFs and returns. But dynamic bond funds may not
index funds be a desirable investment option, given It’s relatively
What is the reason that most ETFs and the scale of volatility involved and the more difficult to
index funds are in the large-cap space price that you have to pay if the fund replicate mid-
only? Why don’t we have them in the mid- manager goes wrong (which has quite and small-cap
or small-cap space? often been proven in the last 10 years).
– AJAY Depending on your investment time indices due to
That’s because it’s relatively more difficult frame, you could choose a liquid fund/ the limited
to replicate mid- and small-cap indices due short-duration fund or a high-quality cor- liquidity of
to the limited liquidity of many of their porate bond fund. Don’t move anywhere many of their
underlying stocks. If a mid- or small-cap beyond high-quality. You must be far underlying
index fund receives large inflows, it won’t more careful and cautious while selecting stocks
be able to deploy that money readily. The your fixed-income investment option.
other problem is that of the impact cost:
when you buy stocks of small, relatively How equity funds will fare
illiquid companies in a large quantity, the I have already lost a lot of money in equity.
act of buying can drive up the index. Do you think equity funds will still give
On the other hand, the Nifty and good returns in the next 10 years?
Sensex are easy to replicate, as they com- – JASMEET SINGH
prise the top 50 and top 30 companies, You should not miss the opportunity of
respectively. These companies are highly learning from the loss. Try and figure out
liquid and if the funds replicating such what happened – did you invest a lump
indices receive large inflows, they will be sum? Or did you try to time the market?
able to deploy the money easily, without You can improve the probability of a
incurring any impact cost. favourable outcome from equities by hav-
ing an investment plan, such as staggering
Investing in dynamic bond funds your investment through SIPs, making To make money,

What is your view about investing in dy- sure that you are diversified and making you also have to
namic bond funds, as here investors need sure that you are not trading in the deriv- make sure that
not worry about the duration of the bond? atives or speculating. you don’t lose a
– KISHORE While equity markets should do well lot of money
Yes, that is the claim of dynamic bond over the next 10 years, there will also be
funds. But the real problem is associated ups and downs. If you come only at the
with the flexibility they have in terms of uptime but don’t invest through the down-
their interest-rate views. Their calls can time and if you don’t invest in good com-
well go wrong and that too during some panies or a good portfolio or a good mutu-
critical occasions. al fund, it won’t work. So, having a plan
Further, since you are investing in a and sticking to it are really important. To
fixed-income fund, it shows that you are make money, you also have to make sure
risk-averse and looking for predictable that you don’t lose a lot of money.

A webinar series to discuss An Investor Education & Awareness Initiative by
savings and investment issues
and answer your questions

To post your query, visit: www.ValueResearchOnline.com/Hangouts

Mutual Fund Insight March 2021 45
Subscription copy of [sabareesan.nair@gmail.com]. Redistribution prohibited.