2020 may not have been the best year for the Indian mutual fund industry. The pandemic-induced market crash resulted in heavy net outflows from the equity segment of the mutual funds industry. Simultaneously, many retail investors flooded the stock markets – perhaps in a bid to explore equities directly rather than through investment options like equity funds.
Mutual funds are some of the best investment options for a variety of investor profiles. For investors who do not want to park lump sum funds in any asset right away, SIPs provide a good alternative. For those looking for asset appreciation coupled with tax benefits, ELSS funds are a good choice. Mutual funds also cater to the needs of both long-term and short-term investors, as well as both risky and conservative investors.
So, in 2021, if you are looking to make mutual funds a part of your investment portfolio, here are some mutual fund trends to keep an eye out for.
International investing is fast catching up
Indian investors are increasingly showing greater interest in international investments. The mutual fund industry has responded to this sentiment by introducing funds that invest, partially, in foreign stocks. The mix of foreign and domestic investments gives many moderate risk-takers the encouragement needed to expand their portfolio’s exposure in foreign stocks.
It’s also advantageous for retail investors who are keen on including global investments in their portfolio, but do not have the confidence to manage or monitor their assets constantly, because with mutual funds, fund managers take care of that aspect.
Additional Read: Why is international investment important for Indian investors?
Roll-down maturity for more predictable returns
This is an emerging mutual fund trend that could greatly benefit conservative investors in the Indian markets. Generally, conservative investors tend to opt for debt mutual funds. However, with debt funds unable to guarantee explicit returns, such risk-averse investors often gravitated towards other safe investments like bonds and fixed income products.
The practice of roll-down maturity has helped tackle this issue. Here, AMCs announce a target maturity date in advance. The funds in question then invest in bonds whose maturity date corresponds approximately with the above-mentioned date. This gives investors a fair idea of the kind of returns to expect by investing in those debt funds.
Preference for short-duration funds
The importance of liquidity has been highlighted by the pandemic. Retail investors are now increasingly embracing the idea of balancing long-term, locked-in assets in their portfolio with more liquid options. So, another mutual to watch out for this year is the rising preference for short-duration mutual funds. You can choose from a variety of short-duration funds available in the market.
Additional Read: Short Term Liquidity: Where does one invest for the same?
The rise of ESG investing
ESG investing is also becoming a popular buzzword in the Indian markets. This year, we may likely be seeing ESG funds catch the interest of Indian investors even more than they did before the pandemic. One reason for this could be the rising need to invest in a sustainable future. This is driving investors to take a closer look at the companies behind the assets they purchase.
The ESG investing philosophy aims to shift the focus on to companies that meet certain norms in environmental and social responsibility and corporate governance. Many Indian AMCs are either modifying existing funds or launching new ones in keeping with the ESG sentiment sweeping across the market. So, this is another mutual fund trend you want to keep an eye out for in 2021.
Now that you know a fair bit about what to expect from the mutual fund industry this year, you could factor these points in before making investment decisions in 2021. In case you’re not sure about the kind of mutual funds to buy for your personal life goals, you could always approach an expert and seek professional assistance to help you make the right decisions. In fact, Tata Capital Wealth also offers you an array of Debt Mutual Funds, ESG Funds and International Funds. Savings can help your money grow, but investing them could make it possible to multiply your funds more exponentially.