Every year in January we come out with a list of 50 mutual fund (MF) schemes that we feel are worthy of your investment. But we don’t leave it at that. In order to ensure that the schemes remain investment-worthy, we review them every six months and it’s time for the mid-year review for 2013.
The Rs.7.61 trillion industry has at least 400 equity schemes, about 400 debt schemes, 25 gold schemes and 700-plus closed-end schemes—that’s a total of over 1,500 schemes. In reality, you don’t need more than 7-12 schemes to build a complete portfolio. That’s where Mint50—our basket of 50 schemes—comes in.
A part of Mint50’s endeavour is not just to suggest MF schemes, but also to keep a close eye on their performance. Since we typically advise you to invest through a systematic investment plan (SIP), it’s important that Mint50 schemes perform well and consistently. Here’s where our mid-year review comes into play.
While we typically don’t like to churn our portfolio too many times, a year’s time sometimes can become too long a gap. A mid-year review gives us an opportunity to make some quick-fixes, spot some emerging trends well in time and brush up our portfolio. Sometimes a new scheme makes for a compelling addition. All such scenarios call for a mid-year Mint50 review.
How do we do it?
We judge scheme performances over a five-year time period as we consider it an ideal holding period. However, in many cases, the longer the better.
Of the 50 schemes that we picked, we removed the two schemes that did not have a five-year track record. We also removed passively managed funds like index and exchange-traded funds since they don’t aim to beat their benchmark indices; they just aim to mirror their benchmarks. For short-term bond funds, we took their one-year performance. Of the remaining schemes (43), as on 8 August 2013, 41—or 95% of the schemes—outperformed the category averages.
We do not account for each individual scheme’s benchmark index because each scheme has a different index. Instead, we assigned benchmark indices when we looked at fund performances; like BSE 100 index for large-cap schemes, BSE 200 for multi-cap schemes and so on, for those categories for which we could find a suitable benchmark index. All of these 29 schemes outperformed the benchmark indices over five years.
For the Mint50 best funds list, go to http://goo.gl/3v5Lw