Holi 2025: Add the Right Colours to Your Mutual Fund Portfolio

Indian equities have seen significant volatility in recent months owing to global uncertainty, inflationary worries, and changing investor moods. Benchmark indices such as NIFTY 50 and BSE Sensex have been subjected to sharp swings, reflecting the need for holding a diversified portfolio.

Additionally, certain sectors have depicted divergent trends - defensive sectors such as FMCG and pharmaceuticals have remained stable, while growth sectors including technology and infrastructure have experienced increased volatility. This changing environment underlines the necessity for investors to examine their portfolio allocations and confirm that they are adequately positioned for future growth.

This Holi, make your investment choices based on the philosophy of colour harmony - merging stability with growth, risk with security, and patience with opportunity. Similar to Holi colours denoting various emotions red for passion, green for growth, yellow for optimism, and blue for stability, investors can follow a considerate approach to harmonize risk and reward by selecting the appropriate mutual fund categories.

With judicious investment in the right mutual funds, you can colour your financial future with enduring prosperity.

The Colours of Holi Mirrored in Mutual Fund Choices

1. Green - Stability and Growth (Large Cap Funds)

Green symbolizes growth, prosperity, and stability. Large Cap Funds are in line with this colour since they invest in established firms that are renowned for consistent performance and less volatility. The funds concentrate on blue-chip stocks, hence being appropriate for conservative investors who want consistent returns with low risk.

[Read: 3 Best Large Cap Funds for 2025 - Top Performing Bluechip Mutual Funds in India]

In this extremely uncertain and volatile market, Large Cap Funds bring stability and thus are a safe bet for investors wishing to keep their capital intact even as they experience modest growth. Large Cap Funds ride out market declines more easily than the smaller-cap segments and are thus a foundation for a stable investment portfolio.

2. Red - Aggression and High Growth (Mid & Small Cap Funds)

The colour red is most commonly linked with power, energy, and aggression. In the world of investment, this holds particularly true for Mid and Small Cap Funds. These funds aim for emerging companies that have a high growth potential, providing a scope for massive returns. Yet, similar to the intensity of red, these funds also involve higher risk and volatility.

[Read: Decoding the Recent Market Correction: What's Behind the Fall in Mid and Small Caps]

However, with the ongoing market turbulence and the steep fall in mid and small-cap segments, investors could experience short-term volatility. Do note, historically these funds have offered high returns in prolonged market rallies. Investors could invest a relatively smaller portion of their portfolio in mid and small-cap funds based on risk tolerance & investment horizon.

3. Yellow - Opportunity (Flexi Cap Funds)

Yellow represents opportunity, adaptability, and positivity. Flexi Cap Funds are the perfect fit for this hue since they allow fund managers the flexibility to invest in large, mid, and small-cap stocks as per the market scenario. This adaptability could be useful while trading in volatile markets where the trends are shifting constantly.

[Read: Flexi Cap Funds: An Apt Choice During Volatile Times]

Under volatile conditions, the potential to dynamically alter asset allocation allows Flexicap funds to tap into opportunities that are nascent as well as avoid risks. By harnessing market intelligence, sector movements, and valuation-based strategies, fund managers can maximize returns by varying exposure across market capitalizations. Flexi Cap Funds thus become a necessary building block for investors who seek a balance between growth and stability.

4. Multi-Colour - Balanced Approach (Hybrid Funds)

Multicolour represents asset balance, a combination of the characteristics of equity and debt. Hybrid Funds do this by blending equity exposure with fixed-income investments. This framework minimizes volatility while preserving growth prospects, which makes it a popular option for moderate-risk investors.

[Read: Does Switching to Hybrid Mutual Funds Make Sense Amid Volatile Markets?]

Hybrid Funds offer a compromise, balancing two disparate asset classes enhancing diversification and enabling investors to succeed under uncertain market conditions.

5.Orange - Emerging Trends and Potential Gains (Sector/Thematic Funds)

Orange signifies excitement, enthusiasm, and concentration. Sector and Thematic Funds are consistent with this colour by focusing on individual industries/sectors and diverse themes with growth potential. Though these funds have the ability to yield remarkable returns during favourable sector performance, they are highly risky due to limited diversification with concentration on a single sector.

Risk-taking investors interested in sectors such as IT, pharma, and infrastructure or themes such as green energy, AI, and EV battery can include such funds to benefit from sectoral/thematic upswings. Please note that one needs a high-risk appetite and a long-term investment horizon to remain invested when these sectors correct as they may take time to revive.

[Read: Are Sectoral and Thematic Funds Worth Adding to Your Portfolio in 2025?]

If macroeconomic shifts make a sector fall out of favour, sectoral mutual fund performance may be impacted negatively. Investing prudently with reduced exposure in such funds can enable one to reap potential growth while safeguarding the overall portfolio from excessive risk.

6. Blue - Calmness and Stability (Debt Funds)

Blue represents peace, calmness, and stability. Debt Funds reflect these characteristics by offering stable returns with low risk. They invest in fixed-income securities such as government bonds, corporate bonds, and other debt instruments, and hence act as a safe haven during periods of volatile market cycles.

Debt Funds are especially ideal for risk-averse investors who wish to conserve capital or earn steady returns. But they are not immune to risks, credit risk, interest rate risk and liquidity risk are significant concerns. Liquid Funds and Short Duration Funds emphasize liquidity and stability and are thus best for investors who wish to park excess funds with less exposure to market volatility.

[Read: Will Debt Mutual Fund Returns Improve After RBI's Latest Bi-Monthly Monetary Policy]

Investors need to evaluate the creditworthiness of underlying securities and the liquidity profile of the fund prior to investment. Debt Funds may continue to be volatile, especially in volatile interest rate cycles, and therefore prudent selection is still essential.

Investment Strategies to Consider

One key approach is to adopt diversification by putting together several categories of mutual funds. Investing across equity, debt, and hybrid funds provides access to various segments of the market and reduces risk.

Another key strategy is to emphasize consistency by selecting funds that have shown consistent performance through different market cycles. Systematic Investment Plans (SIP) are known to be extremely effective, as they allow the investor to withstand market fluctuations with regular investment. SIP investments reduce the risk of market timing and encourage long-term wealth creation.

Additionally, one should resist the urge to follow the market trend or panic sell on short-term noise. Instead, aligning your portfolio with long-term financial objectives will yield sustainable returns and ensure your financial future.

To Summarise...

By balancing investment choices with varied mutual fund categories this Holi 2025, investors can paint a colourful yet secure financial future in the face of market volatility. Incorporating the right 'colours' - mutual fund schemes in your portfolio will make it robust enough to weather unpredictable market swings.

"Wishing You All a Vibrant and Joyful Holi!"

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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
 

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.