What should be your mutual fund strategy in 2022 - Part I

The turn of the year 2022 has brought with it intense volatility in stock markets around the world. We have witnessed a variety of events such as the third wave of the COVID19 pandemic (due to the Omicron variant), the Russian invasion of Ukraine, the sanctions imposed to deter Russia, the rising price of Brent crude oil, the incipient and pivotal Inflation Banks intervene to control inflation. it outperformed most other markets in the world. With fixed income yields falling significantly due to excess liquidity, investors also wanted to know if there was a way to increase their debt fund returns  by looking for higher yielding mutual funds, since they had read about fixed income securities , which they also invested in bonds offered a higher  interest rate. While 2021 was a good year for retrospective investors, 

Our advice to them for 2022 as they look ahead is:

Avoid falling into a recency bias trap: given that Indian equity  funds are poised to be so in 2021 have performed well, there may be a tendency to also extrapolate  returns from 2021 to 2022 and beyond. It is highly unlikely that equity fund returns  can be consistently repeated  at this level in the future, so setting expectations for significantly lower returns in the future is crucial. Global Money Allocation: While India has been one of the best performing markets in 2021, there is ample empirical evidence over the years  that winners rotate and  best performing regions change. Therefore, it is recommended to have an internationally diversified portfolio  with exposure to both developed and emerging market funds and  allocations to Indian equities.