New investors: Shun yesterday's winners, diversify across sectors

Those taking MF route may begin with a passive fund, gradually invest in various market caps, asset classes

The Indian stock market soared to fresh peaks this week. Reports reveal a mixed trend of some existing investors booking profits and retreating from direct equities, and new investors being drawn to it (as is evident from new demat account openings touching a nine-month high in May). At the same time, equity mutual fund (MF) inflows have skewed towards mid- and small-cap funds.

“Any asset that has surged rapidly tends to grab the headlines, spurring people to invest. Frequently, they do this without grasping the nuances of that asset class. When it undergoes a correction subsequently, these investors experience disappointment