Mitigate your risks through mutual fund diversification

OVER the coming year, equity markets are expected to remain volatile. While the sharp economic downturn over the past couple of years appears to be arrested, the signs of any near-term revival remain few and far between. Political uncertainty, in fact, has risen in recent months, and soon political parties will be entering election mode, which means that reform momentum generated over the past few months may take a back-seat. Historically, it has been observed that markets tend to be volatile in the period preceding the general elections. In such a scenario, where markets are so volatile, and with a large number of drivers, it is very important to remain diversified and have a balanced portfolio.

Diversification is the key to risk mitigation in uncertain market conditions. However, one should bear in mind that mutual fund schemes themselves espouse the virtue of diversification and, hence, one should seek risk mitigation in mutual funds across primarily across asset class.

Let's elaborate this further. When it comes to diversification, mutual funds can help an investor in three ways. First, you can invest your hard earned money in one scheme and obtain instant access to a diversified portfolio, across various stocks and market capitalisations. Otherwise, in order to diversify your portfolio, you would buy individual stocks, which exposes you to a higher degree of risk. In other words, a mutual fund allows an investor to diversify into many different stocks for a nominal investment. Secondly, a mu diversification bet sectors. You can e that is broadly dive n does not mean buyemes for your portfonds with a good track e years should be able sonal wealth and has usually been treated as a hedge against inflation. However, over the past few years, due to exponential appreciation, many have started looking at it as one of the more active investment avenues. Gold ETFs are the best vehicle through which you can directly invest in gold ­ again, more as a portfolio risk mitigation tool

Best Performing Mutual Funds

1. Largecap Funds Invest Online
1. DSP BlackRock Top 100 Fund
2. ICICI Prudential Focused Blue Chip Fund
3. Birla Sun Life Front Line Equity Fund
2. Large and Midcap Funds Invest Online

1. ICICI Prudential Dynamic Plan
2. HDFC Top 200 Fund
3. UTI Dividend Yield Fund
2. Mid and SmallCap Funds Invest Online

1. Reliance Equity Opportunities Fund
2. DSP BlackRock Small & Midcap Fund
3. Sundaram Select Midcap
4. IDFC Premier Equity Fund
3. Small and MicroCap Funds Invest Online

1. DSP BlackRock MicroCap Fund
4. Sector Funds Invest Online

1. Reliance Banking Fund
2. Reliance Banking Fund
5. Tax Saver MutualFunds Invest Online
1. ICICI Prudential Tax Plan
2. HDFC Taxsaver
3. DSP BlackRock Tax Saver Fund
4. Reliance Tax Saver (ELSS) Fund
6. Gold Mutual Funds Invest Online

1. Relaince Gold Savings Fund
2. ICICI Prudential Regular Gold Savings Fund
3. HDFC Gold Fund