Mutual fund
The phase of decline in the stock market is not taking its name. Millions of crores of investors have been drowned by the stock market breakdown. However, despite this, investors’ confidence in mutual funds is not decreasing. Through SIP, money is being invested in mutual funds per month. Given the market fall as an opportunity, many mutual fund houses are bringing new fund offers. In this episode, Nippon India Mutual Fund has announced a new fund based on Momentum theme. Open-ended New Fund Offer (NFO) has been introduced as Nippon India Active Momentum Fund Strategy. The NFO is open on 10 February and will close on 24 February.
The purpose is to reduce the risk
The new fund factor investment follows a disciplined, rule-based approach, which reduces emotional decision making and human bias. In this way, an attempt has been made to reduce the risk through this fund. It depends on the basic characteristics of stocks such as alpha, low instability, quality, price, increase etc. The new fund offer is based on a factor called ‘Momentum’. Momentum means a tendency to remain in the same direction with the time of the price of a share. This concept is based on the idea that assets that have performed well in the past can continue to perform well and those who have performed poorly can continue to perform poorly. Nippon India Active Momentum Fund is the strategy fund theme as the theme, as Momentum has been a major factor in recent times. The momentum of living on top of the index in a normal year gives returns on cumulative basis (about 8 times).
This strategy will be on the decline in the market
However, there may be a risk of performance of a high decline in Momentum portfolio at the decisive turn. For example, it has been seen during the early stages of Corona and the global financial crisis. To combat this, fund strategy tries to keep the highest mixture of technical (price momentum) and basic factors (income amendments). In simple terms, funds will employ conditional indicators such as beta and minimal volatility to reduce instability during downtrend using a minimum volatility factor. Factor Investing, whose Momentum is a part, comes with many benefits. These include diversification as factors have different returns patterns at different times, so incorporating the factor investment can reduce the potential risk of the portfolio and its purpose is to increase the long-term performance through diversification.
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