Though there are 50 schemes we think that are investment worthy, we’re not telling you to buy all. 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. Assume that you will invest Rs100 in equity, split that money across a core and satellite approach. The core schemes are your rock-solid, 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. The satellite portion can be used to add the returns kicker or a flavour such as thematic, infrastructure funds or funds that show a promising track record but are relatively new. If you are a new investor, start by putting money in schemes that invest significantly in large-cap scrips; later diversify into mid-cap funds. Ideally, you should have two to three large-cap-oriented schemes, including multi-cap funds, that invest in scrips across market capitalization, up to two mid- and small-cap schemes and one, maximum two tax-saving equity funds. Go for two thematic and sector funds only if you can stomach the risk.
If you had invested in a Mint50 scheme before and can’t find it in Mint50 any more, there could be two reasons. Either, something went wrong with the scheme to merit its ouster or a new scheme made a compelling case to be added. While it is our endeavour to ensure that minimum number of schemes go out, some of the 50 calls we make at the start of the year are bound to go wrong. Which is why we tell you to diversify even within a category.
Are schemes outside Mint 50 bad? Don’t worry if the schemes, in which you are already invested, are not a part of Mint50. Not all schemes that are outside Mint50 are bad. Just because your existing scheme is not a part of Mint50 does not mean you must sell it. See if it is doing a bit better than the broad market index or its own benchmark index and the trend for the past few years. If you find that your fund has underperformed, go ahead and redeem and then choose out of Mint50.
Remember Value Research pitches active and passive funds in the same category. Hence, it is possible that passive funds, such as Benchmark Nifty BeES, Kotak Sensex ETF and so on, show a lower star rating. In sharp rising markets, typically exchange-traded funds and index funds underperform actively managed funds and hence show a lower star rating. But since their mandate is never to outperform the index, but to mimic it, a lower rating doesn’t matter.