Great funds for a volatile market

If you've been following the financial news, you must have read headlines screaming about the October bloodbath because the Sensex dropped 5.7 per cent. Even the traditionally stable BSE 100 TRI saw negative returns for the first time this year. In short, October was horrible for investors.

But here's the thing: before you start panic-selling or socking away your money under the mattress, let's put things in perspective. Before October, the Sensex was actually giving us a sweet average return of 1.87 per cent every month in 2024. That's a year-to-date return of 10.17 per cent. Not too shabby!

Time: your best friend in investing

Think of market volatility like waves in the ocean. They look massive when you're close up, but from a plane flying high above, they appear tiny. That's exactly what happens with your investments over time.

We analysed historical data of BSE 500 and found some results which might help you sleep better:

• With a 10-year investment horizon in BSE 500, you have a 94 per cent chance of earning returns between 8-20 per cent.
  
• But if you're investing for just one year? That chance drops to 23 per cent.
  
• What's more, if you stay invested for over seven years, there's a zero per cent chance of losing money.

Moral of the story: give your investments TIME.

Best funds to ride the volatility

Giving your investments time is easier said than done.

What if reading about market swings makes your palms sweaty? Don't worry, you're not alone.

This is where hybrid funds come into the picture. Hybrid funds, which invest in both equity and debt, can limit downside risk while providing significant upside potential.

While these funds aren't safe from negative returns as they have some allocation to the volatile stock market as well, they are ideal for timid beginner investors with shorter time horizons.

Here's why:

The primary benefit of hybrid funds lies in their ability to fall less during market downturns than their pure equity counterparts. That's because their debt investments provide more stability, while their equity component can deliver high returns during market upswings.

But remember, while hybrid funds won't match the returns of pure equity funds like flexi-cap funds during bull runs, they'll help you sleep better during market storms.

Which is the best hybrid fund?

It's crucial to find one that matches your comfort level. So, use the table below to find the type of hybrid fund that matches your risk appetite and time horizon.

The next step is to select a quality fund within these categories. To make it easy, we suggest you explore the funds handpicked by our analysts.

The last word

The best investment strategy isn't necessarily the one that could make you the most money, it's the one you can stick with through market ups and downs.

Also read: These mutual funds are turning cautious despite market's amazing bull run