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3️⃣ Lessons from Mutual Fund Performance in 2022

CHART OF THE WEEK 📈

Most equity mutual fund categories have outperformed the Nifty 50 in 2022 so far despite all the volatility and uncertainty that the market has been marred by.


📌 Avoid Sector Concentration

The best and worst performing categories are sector-focused funds, highlighting the importance of diversification during tough times! Sector funds in insolation are always a bad idea, and you’d be better off with exposure to diversified funds to even the risk out.


📌 Surprise by Mid and Small Caps

Usually, when uncertainty increases, liquidity moves from mid and small caps to large caps because of risk aversion, and because of potentially lower impact on the financials of large caps.


However, this year so far, mid and small-caps have outperformed despite worsening conditions, which is rather counterintuitive. Perhaps, that also explains why Flexicap haven't done too well!


📌 The Benefit of Staying Invested

While the Nifty 50 is down by just 0.7% this year, it’s touched a high of +4% from the beginning of the year, and a low of -13% from the beginning of the year.


If one tried timing the markets, they would have increased the probability of losses in that wide 17% range. In the hindsight, it was far easier to just stick around, do nothing, and not lose money!

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