Active Fund Management: Get Shielded Against the Market Risk in Correction Phase

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With a number of changes going on in the investment market, it has become tough for investors to finalize the right investment product and with a huge number of options, the situation has only become complex. Mutual funds are divided into different categories and is managed in different styles by the fund managers. Two such styles are active and passive way of investing in funds. Let’s read about what active funds are, why and how they can help you earn better.

What Are Active Funds?

Actively managed funds or active funds are those funds which are managed actively and try to beat their index. The fund managers of these schemes need to put in great efforts as this style require them to be on toes all the time and keep changing the allocation by further aligning them to those instruments that can provide high growth.

Why Should You Invest in Actively Managed Funds?

There are a number of benefits of investing in the actively managed funds which are as follows:

1. Opportunity for Better Earning - Active funds provide a fair chance to investors to earn attractive returns as it keeps changing its asset allocation as per their performance and market conditions. If the fund selected is right and the fund manager is well experienced, then your investment in it might just turn out to be the best choice that you ever made.
2. Shield Against the Market Risk - The continuous changes in the market conditions can affect the returns that an investor might have otherwise earned. Investing in active funds provide a shield against the market risk and saves an investor against the losses. This happens due to change in the asset allocation and investment made in funds that are likely to perform better.
3. Professionally Managed - Since these funds require continuous monitoring, therefore the fund managers of these fund are usually highly educated and experienced persons. These are the ones that have an understanding of directing the fund in the right direction from time to time.
4. Diversified Investment - These funds provide a chance to invest across different instruments as the investment made under this fund is usually diversified and keeps on changing from time to time according to the need. Thus, increasing the scope of earning better returns.
   
   

How Active Funds Prevent You Against the Risk in Correction Phase?

With the correction phase going on in the mid cap and small cap space, it has become confusing for investors to select the right fund, this is the reason that the expert at MySIPonline is suggesting investment in active funds. These funds are likely to shield an investor against the market risk that comes with the correction phase. This phase generally includes lowering of the net asset values of the funds which further makes the investors panic. If the funds are managed well during this time, then it may enhance the chances of returns generated by them. This is what happens in the case of active funds, and therefore are considered as the protectors against the market risk.

Factors to Keep in Mind While Investing in Active Mutual Funds

The mutual fund market is subject to market risk, and therefore it is important to take the decisions consciously. So, we are sharing with you some of the factors to be considered while selecting an active fund.

1. Qualified Fund Manager - As of now you know what role a fund manager plays in the functioning of a scheme, therefore you should find about the fund manager of the scheme, selected by you, well in advance. The person must be well educated, experienced and must possess the required expertise.
2. Past Returns - Go through the past returns of the scheme to know how it has performed under different market conditions. Please note that the past performance of a scheme is merely an indicator and cannot be completely relied upon, as the market can fluctuate anytime affecting the returns.
3. Risk Management - It is important to find out how the risk is being managed and the reason is that its ignorance can lead to huge losses. Therefore, check the risk involved and the steps that are being followed by the manager to manage the same.
4. Asset Allocation - Understand and keep an eye on how the assets are being allocated and the changes that are taking place in the allocation with time. If you find it suitable and fine, then you may invest in the scheme.
   
   

The End Note

Every investor willing to invest in active funds must understand that although these funds involve high risk, they also provide a chance to earn better returns. So, if you are an aggressive investor, then you may opt for such funds for your investment portfolio. You may invest in these funds through our platform MySIPonline and may even connect with the experts in case of any help. You can even post any regular fund related query here.

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