What is a Special Situations Fund?


A special situations fund is an open ended equity mutual fund scheme that follows a unique investment strategy where it tries to take advantage of a special situation which might lead to an increase in the value of a particular asset in future. Such schemes invest in a mix of equity and debt instruments. Hence, they have a dual objective of wealth creation and stability. A special situation is bound to arise during any point of an economic cycle.Special situation schemes focus on such peculiar goals and direct investments towards these goals. Such schemes invest in a mix of equity and debt instruments. Hence, every special situations schemes have a dual objective of stability and wealth creation.

Start a SIP in special situations fund

A Systematic Investment Plan (SIP), is an easy and hassle free way to invest in mutual funds from the comfort of your home or office. Earlier, mutual fund investors had the sole option of making a one time lump sum investment. However, with SIP investors can now invest in mutual funds using their laptop or even their smartphones and a decent internet connection. Young investors can start a SIP in special situations funds by completing all the pre investment formalities with their bank and the AMC, following which every month on a fixed date, a predetermined amount will be debited from their savings account and electronically transferred to the mutual fund. This way, they will not only start saving automatically, but also inculcate the discipline or investing regularly. Investors can also refer to SIP calculator, a free online tool to help them determine the approximate gains the might receive at the end of their investment journey Also if one remains invested in a hybrid fund through SIP for a long time, they can benefit from compounding and might even be able to achieve their ultimate financial goal.

Make the most of your special situations fund by benefiting from power of compounding

In mutual funds, compounding refers to the interest earned on the interest or profits earned on the profits from your investments. Power of compounding might help smaller investments to grow and fetch decent returns in the long run. Anyone who wishes to benefit from compounding may have to start investing at an early stage in their life. This way you have more years in hand and time is your friend. The more time you have to invest in mutual funds via SIP, the better it is. When you start a SIP, every month a certain amount gets added to your mutual fund. If you continue investing this way for a long period of time, and gradually increase the monthly SIP as per the fund’s performance, you may be able to benefit from compounding.

Investors can target their life’s long term financial goals with special situations fund

It is better to have a long term investment horizon while investing in special situations funds. Since these are equity oriented schemes, investors can target their life’s long term financial goals like buying their dream home or building a solid retirement corpus for their sunset years.If wish to make the most out of your investments in special situations fund, then you must remain invested for a minimum period of five to seven years.

Mutual fund investments do not guarantee capital appreciation. Those that are exposed to market volatility possess a high risk profile. This is the reason it is better to understand your appetite for risk before investing in mutual funds. Also, if you are completely new to investment planning, make sure you consult your financial advisor before investing.

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