Connect your investment goals with Indian festivals - Navratri, Dhanteras, and Diwali

A balanced investment approach is a financial planning technique where you divide your investment amount across different types of assets (instead of putting it in a single option). The core idea is to mix growth assets (like equity and real estate) with defensive assets (like debt and gold). 

For those unaware, growth assets are usually more risky but can accelerate your corpus accumulation. On the other hand, defensive assets are more stable and protect your portfolio returns during uncertain times. 

Now, this mix aims to offer you a better balance. If one asset underperforms, the other assets in your portfolio help to provide a cushion against the severe downfall of your entire portfolio value.

Before you decide how much to invest in equity, debt, or gold, you must first understand your “risk appetite”. Some investors are fine with short-term market fluctuations in exchange for long-term returns, while others prefer stability even if the growth is slower. 

Once you know your comfort level, you can choose the right mix of assets. Refer below example for understanding your  risk appetite and asset allocation:

Note: This table is only for illustration purpose and may differ from investor to investor based on his/her risk-appetite. Investors should consult their financial advisors to understand their risk appetite and asset allocation better.
 

Note: The information provided above is entirely for educational purposes. Investors are required to do their own research before investing. 

Are you a high-risk investor looking to aggressively grow your corpus? This festival season, you can follow a long-term allocation strategy, where:

• You can invest around 80% in growth-oriented assets like equity

      and 

• You can put around 20% in defensive assets like debt and gold.

This approach is inspired by the idea that most wealth growth comes from higher-risk investments, while a smaller share in defensive/ stable assets cushions portfolio returns.

In contrast, if you are a conservative or moderate investor, you can opt for a higher debt/gold size (say 60-80%) and reduce the equity allocations (say 20-40%). 

Now, once you have determined your risk appetite and the ideal asset mix, you can consider the several Mutual Fund schemes for investment purpose. These plans offer both SIP investments and lumpsum investments that start from ₹100 and ₹5000, respectively. This does not apply to ETFs.

Also, these mutual fund schemes are available in multiple options/variants, such as:

• Regular - Growth 
• Direct - Growth
• Regular - IDCW (Income Distribution cum Capital Withdrawal)
• Direct - IDCW

This does not apply to ETFs.

Now, let’s check out some schemes you can consider this festive season:

(An open-ended equity scheme investing in the banking and financial services sector)

Tata Banking and Financial Services Fund is a sectoral equity scheme that can invest at least 80% in Equity & equity related instruments of companies in the Banking and Financial Services Sector in India. These include but are not limited to the following:

• Banks
• NBFCs
• Insurance companies
• Other financial firms in India

The fund manager can select companies using a “Growth at a Reasonable Price” approach and pick businesses that have potential to grow. This selection can be based on factors like:

• Management quality
• Competitiveness
• Governance
• Growth prospects
• Past performance

While doing comprehensive financial management and investing in this scheme, you must understand that your principal could be at “very high risk”.

(An open-ended equity scheme investing in the pharma and healthcare services sector)

Tata India Pharma and Healthcare Fund is a sectoral equity scheme that can invest at least 80% in shares of:

• Pharmaceutical companies
• Hospitals
• Healthcare service providers

The portfolio of this scheme can be built using a “Growth at a Reasonable Price” strategy, where the fund manager can choose companies that are not overpriced. 

Additionally, this fund invests in large-cap companies, with additional exposure to mid-cap and small-cap firms. Some money may also go into debt or money market instruments for diversification.

(An open-ended debt scheme investing predominantly in government securities across maturity. A relatively high interest rate risk and relatively low credit risk.)

This is a debt fund that mainly invests in government securities of different maturities. This scheme seeks to generate medium to long term capital appreciation and income distribution by investing predominantly in Government Securities. However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The scheme does not assure or guarantee any returns. 

Since government securities carry sovereign backing, the fund has low credit risk, but it is exposed to interest rate risk (the value of bonds changes with interest rate movements).

To decide the right mix of securities, the fund manager of this scheme can study macroeconomic factors such as:

• Liquidity
• Inflation
• Interest rate trends

Post-analysis, investments can be made in predominantly in government securities (80% to 100%), money market instruments (0% to 20%). This scheme can also participate in auctions of government securities. The Gilt Securities Fund may be suited for investors with an investment horizon of three years or more.

Understand more about Gilt Fund meaning, features and benefits and why you should invest in Gilt Fund.

(An open-ended debt scheme predominantly investing in AA+ and above rated corporate bonds, with flexibility of any Macaulay duration and relatively high interest rate risk and moderate credit risk.)

This is a corporate bond fund that can generate income and some capital appreciation in the short to medium term. This scheme mainly invests in Corporate Debt instruments (including securitised debt) across maturities and ratings (80% to 100%), Other Debt & Money Market Instruments (0% to 20%), Units issued by REITs & InvITs (0% to 10%)

The fund managers of this scheme can select financially strong issuers with:

• Good credit history
• Strong governance standards
• High liquidity

To reduce risk, it can also follow a “laddering strategy”, where bonds of different maturities are chosen. This approach can reduce the impact of interest rate changes on the portfolio.

This fund may be suitable for those who are seeking potential regular income + relative stability (over a short to medium-term horizon).

(An Open-ended Exchange Traded Fund replicating/tracking the domestic price of Gold)

This scheme is a Gold ETF scheme  that invests in physical gold. This scheme seeks to generate returns that are in line with the performance of physical gold in domestic prices, subject to tracking error. The units of this scheme are listed on the NSE and other exchanges, so investors can buy and sell them like shares on any trading day at market prices.

The fund calculates and publishes its Net Asset Value (NAV) every business day, which reflects the value of the underlying gold. This scheme may be suitable for investors who want to invest in gold in digital form during major festivals, like Navratri, Dhanteras, and Diwali and on other business days also.

Instead of investing only in gold this festive season, you can follow a balanced investment approach. Following it, you can diversify and invest across multiple assets like gold, equity, and debt. Such a diversification seeks to reduce your over-reliance on any single asset and create a more stable portfolio. 

To build such a mix, you can also consider Tata Mutual Fund schemes, such as Tata Banking and Financial Services Fund, Tata India Pharma and Healthcare Fund, Tata Gilt Securities Fund, Tata Corporate Bond Fund, and Tata Gold Exchange Traded Fund. Depending on your risk appetite (high, moderate, or conservative), you can combine these funds to aim to achieve potential growth, relative stability, or capital appreciation over long term.

Disclaimer: 

The views mentioned above are for information & educational purposes only and do not construe to be any investment, legal or taxation advice. Investors must do their own research before investing. The views expressed in this article are personal in nature and in is no way trying to predict the markets or to time them. Any action taken by you on the basis of the information contained herein is your responsibility alone and Tata Asset Management Pvt. Ltd. will not be liable in any manner for the consequences of such action taken by you. Please consult your Mutual Fund Distributor before investing. The views expressed in this article may not reflect in the scheme portfolios of Tata Mutual Fund. There are no guaranteed or assured returns under any of the scheme of Tata mutual Fund.