How to use Mint50
The list is there to simply narrow down your choice to a more manageable one
Though there are 50 schemes we think that are investment worthy, we’re not telling you to buy all or even half of them. The list is there to simply narrow down your choice to a more manageable one. A good portfolio need not go beyond 7-12 schemes spread across fund types and asset classes. So, how do you select out of these 50 schemes?
First, decide what your debt and equity allocation is going to be. Assume that you will invest 100 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’d 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 to your portfolio such as thematic, infrastructure funds or those funds that show a promising track record but are relatively new. If you are starting to invest afresh, start by putting money in schemes that invest significantly in large-cap scrips and then 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 or maximum two tax-saving equity funds. Then, if you have the risk appetite and would like to get a returns kicker, go for thematic and sector funds.
If you had invested in a Mint50 scheme before and can’t find it in the list anymore, 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 a 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 scheme outside Mint50 bad?
Don’t worry if funds, in which you are already invested in, are not part of Mint50. Not all funds 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 what this trend has been for the past few years. If you find that your fund has underperformed, go ahead and redeem and then choose out of Mint50.
Also 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 Value Research rating. In sharp rising markets, typically exchange-traded funds (ETFs) 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 here doesn’t matter.
Why are some schemes flagged?
A red-flagged scheme or category indicates a high-risk, high-return option. Only investors who have a high risk appetite should opt for such schemes. Mid- and small-cap schemes can be little less risky, though, than thematic and sectoral funds, all of which we have flagged.
An orange flag indicates a slump in performance because the fund’s strategy might be punished by the markets. The reason why these funds still feature in Mint50 is because we have belief in these schemes’ fund management. However, their recent past performance don’t offer enough confidence to merit further investments till track record recovers. Fresh investments (apart from ongoing SIPs), therefore, should be avoided. Existing investments must continue, though, till we are convinced the scheme should exit Mint50.
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