The Mint50 biannual audit of mutual funds
We replace seven Mint50 schemes. Big changes are in the infra and short-term bond funds categories
The start of the year is usually a good time to take stock of your portfolio: to check which of your investments did not do well in the past year, to check whether you need to remove any of them, or add some new ones. If you invest in mutual funds (MFs), then Mint50 is your friend. This is a basket of 50 schemes that we recommend to our readers. This year, we turn two. Which begs the question: how have we done so far?
Of the 34 diversified equity-oriented funds we recommended last year, 29 outperformed their respective category averages. Remember, 2011 was a tough year on equity funds as the benchmark index BSE Sensex lost 25%. Our best performing large-cap scheme fell by just 16%, while our best performing multi-cap fund fell by 15.18%. Mid- and small-cap funds fell harder, especially in the last two months. CNX Midcap index lost 31% in 2011. Though losses are hard to digest, it bodes well if your fund falls less than its benchmark. (Read more)
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What to expect when investing in MFs
Expense Account | Monika Halan
Investing in mutual funds is an exercise in choosing according to your needs andthen managing your expectations
What do you expect your mutual fund to do? It is worth asking and answering this question as we carry out Mint Money’s biannual exercise of examining Mint50—the portfolio of investment-worthy funds that the Mint Money team curates. A quick word on why we do this. Indian households have a high savings rate but most of this lies in inflation-unfriendly deposits and traditional insurance plans. A gradual move up the risk scale would benefit the investors but that has not happened and fewer than 15% of Indians expose their money to equity, either directly or through funds. Similar looking products promising to do the same thing—long-term corpus building that come from three different regulators—seem to be confusing investors. (Read more)
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Mint50 Mutual Funds | What’s in, what’s out
Mutual funds that made to the list of best of Mint 50
AIG India Infra and Economic Reform Fund (AIE)
The fund has been working hard at improving its performance over the past
three years, bouncing up from just matching the benchmark it tracks three years ago to outperforming it by 4 percentage points over the past year. Apart from investing in infrastructure related sectors and having significant exposure to small- and mid-cap stocks, it invests in sectors that benefit from economic reforms; the latter allows AIE to invest in the banking sector—something that most other infrastructure funds do but cannot justify as being true-to-label. “Under the theme of economic reforms, we try to look for opportunities where the companies will benefit due to reforms undertaken to reduce fiscal deficit,” says fund manager Huzaifa Husain, explaining the exposure to banking stocks in an infrastructure fund in general and government-owned banks in particular.
Mint 50 Mutual Funds | What’s out
DSP TIGER Fund (DTF)
DTF’s performance has been stable, but it goes out because of a better alternative that has a similar mandate (AIG India Infrastructure and Economic Reform Fund). The fund’s size has gone down significantly; at present, its size is Rs 1,652.5 crore as on 31 December 2011, down from Rs 4,024 crore as on November 2007. The fund is over-diversified; it has about 65 stocks and 47 stocks in its portfolio held less than 2% each. In December 2010, it had about 90 stocks. “The portfolio is more concentrated than what it was before. But a large portfolio also leads to better liquidity management; it’s easier for us to sell them when we want to,” says Anup Maheshwari, head (equities and corporate strategy), DSP BlackRock Investment Managers Ltd. (Read more)
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How to use Mint50
The list is there to simply narrow down your choice to a more manageable one. A good portfolio need not go beyond seven to 12 schemes spread across fund types and asset classes
Just because there are 50 schemes in Mint50, doesn’t mean you buy all of them. The list is there to simply narrow down your choice to a more manageable one. A good portfolio need not go beyond seven to 12 schemes spread across fund types and asset classes.
First, decide what your debt and equity allocation is going to be. Assume that you will invest Rs 100 in equity, then split that money through a core and satellite approach. The core schemes are your long-term performers that come with a good track record, in which you would expect to stay invested for a long time. Depending on your risk profile, this should take about 60-70% of your portfolio.
Mint50 methodology
The main purpose of Mint50 is to give our readers a choice of 50 schemes that are investment worthy. But remember, do not buy all 50. We aim to give you a choice across fund houses and styles so that you can pick and choose those that best fit your needs. Ideally, your portfolio should have 7-12 schemes.
We restrict this curated list to equity and debt schemes and leave out liquid schemes since these are meant for short-term needs and is more of a parking vehicle for large-ticket money rather than a useful alternative to a savings deposit. Out of a universe of 787 schemes (excluding fixed maturity plans and liquid funds), we filter out the 3-star and above rated schemes. This reduces the number of schemes to 274. (Read more)
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ALSO SEE
Mint50 Best Fund (PDF)