Tactical investment beats volatility

New Delhi: Amid volatility, irrespective of market cycles, tactical investments are the best option for investors looking to have a core portfolio structure, especially in the mutual fund space. Industry experts feel assets backed by scientific models mitigate volatility and deliver good returns.

"We need to have tactical investments in various investment tools, especially in mutual funds. One of the biggest worries that trouble every potential investor is if the markets go down just after they invest. The fear of volatility deters long-term investing. Allocation towards the right asset class is a key determinant for portfolio performance in the long run," said T Srinivas, Founder of Hyderabad-based investment advisory firm Sri Investments.

An important step in building a successful portfolio is to divide capital among different classes of assets, he said.

Fund managers believe mutual funds, which are considered popular and convenient investment tools, have advocated asset allocation-based strategies to make the journey smoother for investors. In this context, dynamic asset allocation funds give four main benefits. "Firstly, they give diversification between asset classes. Two, regular monitoring and re-balancing ensure losing less and gaining more. Three, better-risk adjusted returns are generated and four, the funds deliver debt taxation with indexation benefits," said a Mumbai-based fund manager.

Over the years, dynamic asset allocation funds have proven their mettle. By keeping human emotions aside, they use the 'buy low' and 'sell high' philosophy in a disciplined way. This comes as a relatively better investment option in various market cycles.