There are various ways to invest in the market—buy and hold; view-based; based on fundamentals; and other structured products.
Investing in mutual funds is similar to “buy and hold”. But it's important for an investor to develop the ability to sit through times of heightened volatility as there's a probability of higher returns in the long term.
Vijai Mantri, chief investment strategist and founder-promoter at JRL Money, explains this with the help of HDFC Equity Growth Fund.
“If you invested in this fund at the start of 2008 you would have a 34 percent negative return in the calendar year. This would bring down your investment of Rs 1 lakh to Rs 66,000. But by the end of the second year, your investment would have grown at an annualised rate of nearly 20 percent,” he said in BloombergQuint's weekly series The Mutual Fund Show.
“Similarly, the odds of generating positive and higher returns, too, go up as the investment period increases. There is a 27 percent chance of losing some money on your investment over one year. But if you stay invested for at least five years you have 100 percent probability of getting positive returns and a 96 percent chance of those returns being greater than 8 percent on compounded annual basis.”
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