Methodology of Mint303 min read . Updated: 19 Jul 2018, 11:14 AM IST
Due to regulatory changes, we have tightened our basket to 30 funds
We use a mix of quantitative and qualitative parameters to shortlist schemes. This is a list of equity and debt schemes; we leave out liquid schemes since they are meant for very short-term needs and are a parking vehicle for your money till it gets deployed. We also leave out long-term bond and government securities schemes as they are seasonal and their fortunes can change swifty based on government actions and interest rate movements.
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Mint50 was launched in January 2010 and it was a basket of 50 schemes back then, up until 2018. Due to regulatory changes, we tightened our basket to 30 funds. In 2010, we picked all 3-star and above rated schemes from Value Research’s star ratings and curated our list after the schemes passed through our quantitative and qualitative loops. We use data from Value Research, a mutual fund tracking firm.
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But that was the first and last time we used star ratings. Why does Mint30 go beyond star ratings? Star ratings are a good indication of how schemes have performed in the past. Ultimately, it is a report card that gives a good insight about a fund’s past, but tells little about how the fund is poised to do in the future. That is where Mint30 comes in. Once we ran the basic list of 3-star rated schemes (in January 2010), our qualitative checks took over. We run checks such as a study of portfolio strategies, how fund managers manage their schemes, their pedigree and their performance in rising and falling markets, to be able to cull out a list.
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Detailed chats with fund managers are a must before a scheme enters or exits Mint30. As far as past returns are concerned, we give more importance to a scheme’s rolling returns instead of just point-to-point returns. When you take only two points to compute returns, you ignore the fact that investors enter and exit at all points in time. The volatility between these points also gets ignored.
Since Mint30 is already in existence, this is an audit of existing schemes—which ones should stay in and which ones should move out. There are a total of 36 categories of schemes. Not all of them make it to Mint30. We pick the most basic categories across equity, hybrid and debt funds. Categories that come with a broad mandate like dynamic asset allocation funds are avoided. For debt funds, so far, we have stuck to short-term bond funds since long-term debt funds are seasonal and come with volatility. Going ahead, we would have corporate bond funds; a set of debt schemes that invest in high-quality debt scrips.
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A scheme may move out because either it did badly or there is a better alternative. When we started Mint50 in January 2010, we gave a list of schemes that we thought would do well over the long term. Most of the schemes would be on track, but some would have gone astray. This is because when we picked a scheme, its track record and prospects must have been good, but because its fund strategy may not have worked well in the present markets, performance may have suffered. We keep a close watch on such schemes and may recommend a temporary halt in fresh investments. A dip in performance could also be temporary because of a change in strategy or reclassification of its category and, therefore, a new set of schemes to compare its performance against.
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Sometimes, our reading of the scheme goes wrong. We hope—and aim—to have as few changes as possible because we hate to churn the Mint30 list. If we tell you to stay invested for long tenures, it’s only logical that we do that too