Investing in mutual funds can be a suitable way to grow wealth over time. With the wide variety of funds available, one of the key factors investors often focus on is diversification. Diversification helps reduce the risk associated with investing by spreading investments across different assets, reducing the impact of a poor-performing asset on the overall portfolio.
The Bajaj Finserv Multi Cap Fund is one such option that offers diversification opportunities for investors. The fund follows a contrarian investment strategy, which could be a suitable choice for individuals looking to optimize returns while balancing risk.
What is a multi cap fund?
A multi cap fund is a type of mutual fund that invests in equity securities of companies across various market capitalization categories – large cap, mid cap, and small cap with minimum 25% investment across each of large cap, mid cap and small cap companies. By investing in a mix of companies from different market caps, the fund aims to provide exposure to a broad range of industries and sectors, making it a tool for diversification.
Unlike other funds that focus on specific market cap segments, a multi cap fund offers a combination of large, well-established companies, mid cap companies having potential for higher growth with slightly higher risk and smaller, emerging firms, providing opportunities of diversified worlds. This strategy can help you navigate market volatility while optimizing potential returns.
The contrarian investment strategy of Bajaj Finserv Multi Cap Fund
The Bajaj Finserv Multi Cap Fund follows a contrarian investment strategy, which sets it apart from more traditional equity funds. In simple terms, a contrarian strategy involves investing in stocks or sectors that are out of favour with the broader market but have the potential for significant future growth in the long term. Instead of following the crowd and buying stocks when they are trending or at their peak, the fund looks for undervalued stocks that may be overlooked. The primary goal of a contrarian strategy is to buy when others are fearful and sell when others are overly optimistic. This strategy can lead to potentially higher returns over time if the chosen investments recover or outperform the market.
Diversification across market capitalizations
As a multi cap fund, Bajaj Finserv Multi Cap Fund invests in companies across large, mid, and small cap segments helping create a diversified portfolio. Let’s break down the benefits of this approach:
Exposure to Different Market Caps
- Large cap stocks are well-established companies with a relatively stable track record and lower volatility. These stocks tend to offer steady returns and lower risk, especially during periods of market turbulence.
- Mid cap stocks represent companies that have the potential for higher growth in long term, but they also come with slightly higher risk compared to large caps. These companies are typically in their growth phase and are more susceptible to market changes.
- Small cap stocks are the riskiest but also offer the potential for the comparatively higher returns in long term as compared with large cap and mid cap. These companies are still growing and expanding, and while they can be more volatile, they could offer growth opportunities when selected wisely.
By investing in all three segments, the Bajaj Finserv Multi Cap Fund ensures that your portfolio is not overly reliant on any one segment. This mix of low-risk and high-risk stocks helps reduce the impact of a downturn in any specific market cap category.
Sectoral diversification: A diversified sectoral approach ensures that the fund is not overly dependent on the performance of any single industry. This is especially important in volatile times when some sectors may outperform while others underperform.
Systematic Investment Plan (SIP) and its benefits
Investing through a Systematic Investment Plan (SIP) can help you grow wealth over time. SIPs allow you to invest a fixed amount at regular intervals, ensuring that your investments are spread across both high and low market conditions. This strategy helps in averaging out the cost of purchase over time, reducing the impact of market volatility on your portfolio.
The Bajaj Finserv Multi Cap Fund could be a suitable opportunity for SIP investments. By using an SIP step-up calculator, investors can increase their SIP contribution gradually based on their growing financial capacity. This allows you to benefit from the power of compounding and increase your investment amount at a comfortable pace, helping you accumulate wealth steadily without overburdening your finances.
Why choose Bajaj Finserv Multi Cap Fund for diversification?
High potential returns: The fund’s contrarian strategy and multi cap approach could provide opportunities for long term growth. By investing in underpriced stocks and holding them until they recover, the fund can potentially generate above-average returns in long term.
Risk reduction: Diversifying across market caps and sectors could significantly reduce the risk of a concentrated portfolio. Even if one segment underperforms, others may do well, balancing the overall risk.
Ideal for long-term investors: The Bajaj Finserv Multi Cap Fund could be a suitable opportunity for long-term investors who can tolerate short-term volatility for the potential of comparatively better returns. Over time, the fund’s strategy is likely to yield reasonable results.
Conclusion
Incorporating the Bajaj Finserv Multi Cap Fund into your portfolio could help you diversify your investments, balancing risk and reward. The fund’s contrarian approach aims to look beyond market trends and focus on undervalued opportunities with strong growth potential. By combining a multi cap strategy with expert fund management, it offers a well-rounded solution for those looking to build wealth over time.
Moreover, using tools like the SIP step-up calculator can help you invest in this fund systematically, increasing your contribution as your financial situation improves. With its diversified investing approach across market caps, and sectors, Bajaj Finserv Multi Cap Fund could be a suitable choice for any investor looking to diversify their portfolio and build wealth over the long term.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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