Create a balanced financial portfolio

Investors have only one goal in mind - add value to the money they are investing. In these unprecedented times, it is of utmost importance for all investors to invest wisely, and in such a way that they make most of the fluctuations in the market. This is where long-short funds come into the picture. This is a specific type of mutual fund portfolio in which some investments are held long and some investments are shorted. The objective of this type of investment is to add value to the client regardless of how the market is performing. The fund managers do this by investing on behalf of the client in long and short positions in the market. When the manager feels that a certain investment will do poorly, he/she shorts that fund by selling. In most cases, only stocks that are overvalued at the moment are shorted. Long short funds in India are relatively new, but have been found to add value to the investors.

 

This investment portfolio is also referred to as the 130/30 fund strategy. For instance, a fund manager invests 100% of the client’s initial capital in long positions in the market, then goes on to invest 30% by shorting the stocks/securities. To explain it further, the initial investment of 100% will remain in the market, while any profits earned by shorting the 30% stocks/securities will be reinvested again in the market. Through this strategy, the fund managers are in a position to create a portfolio worth 160% from the initial investment of 100%.

 

Long-short mutual funds add value to the customers by giving them the opportunity to invest in a diversified portfolio. The investment does not depend entirely on the market conditions as the diversified investment helps in creating a stabilized financial portfolio. Unlike other investment portfolios, investors have the opportunity to take advantage of both rising and falling markets in case of long-short funds. Proper advantage can be taken from the volatility in the market. There are multiple top asset management companies in India that are involved in long-short funds. One of the major advantages of this type of portfolio being that short selling is permitted in this case, while it is not for other types of mutual fund investments.

Sustainable investment is the way forward

The world is changing drastically, and along with it the need for us to be aware of sustainable practices in all aspects of our lives. In the long run, it is important for all companies and governments to be more mindful of different factors affecting the environment and should actively look at giving back to the society that nurtures them. The concept of ESG (Environment, Social, and Government) funds is a sustainable investing act that measures a company’s score on different aspects like environment-friendliness, labor laws, Corporate Social Responsibility (CSR) initiatives, human resource rights, etc. This is a means to create accountability for corporations to be responsible towards their environment and the people who work for them.

 

ESG investing is the need of the hour because it benefits both the company and the investors in the long run. Now more than ever, it is evident that companies that do not adopt sustainable practices and pollute the environment will not be able to sustain in the long run. ESG funds in India is a subtle push in the right direction, which will in turn be a win-win situation for all the parties involved. Many investors are also actively looking into investing in more such companies that are considerate towards the environment and willing to give back to the community. Data also shows that companies that rate high on the ESG score have a good debt-equity ratio.

 

Nowadays it is common for companies to have strong values that help them in building a socially and environmentally responsible business model. ESG funds India are causing a change in the marketplace, it is a good practice to show both companies and stakeholders that the future is not only about profitability. This initiative also helps to align their personal values and goals with their investment practices, they can invest only in those companies that have a high rating of ESG score. Many large investors are already adapting to such practices, and since it is within their capability to make a difference through their investment, corporations, and governments must also be ready to take responsibility and accountability.