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Tata Capital > Blog > Wealth Services > Mutual Fund Trends to keep an eye on in 2021

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Mutual Fund Trends to keep an eye on in 2021

Mutual Fund Trends to keep an eye on in 2021

Investing in mutual funds is an excellent way to build wealth for both seasoned investors and beginners. They offer benefits like professional management and diversification, helping you invest in the stock market, even without any expertise.

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?

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

Many retail investors are looking to strike a balance between long-term, locked-in assets and more accessible, liquid options. This shift has led to a growing interest in short-duration mutual funds, which offer an alternative for managing both risk and returns. With a variety of options available in the market, short-duration funds are becoming increasingly popular among investors seeking to optimise their portfolios.

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.

Increase in the number of SIPs

Systematic Investment Plans (SIPs) are gaining significant popularity among retail investors. According to the Association of Mutual Funds in India (AMFI), there are approximately 8.99 crore active SIP accounts. SIPs allow investors to invest in mutual funds regularly, promoting financial discipline and mitigating market volatility.

Digitised investments

The rise of digital platforms has made it easier for investors to invest in mutual funds conveniently. These platforms are accessible and offer a range of features, including paperless transactions, real-time tracking, and easy portfolio management. These benefits make digital investment platforms particularly appealing to tech-savvy and time-conscious investors, streamlining the investment process, reducing costs, and enhancing the overall investor experience.

Conclusion

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.

Disclaimer: Investment trends can change over time due to various economic, political, and market factors. Therefore, it’s important to always make calculated and informed investment decisions.

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