Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
BackBack

Mint50

Though there are 50 schemes that we think are investment worthy, we're not telling you to buy all.

Premium


HOW TO USE MINT 50

Though there are 50 schemes that we think 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 is going to be. Assume that you will invest R100 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 these, 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 to your portfolio like 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. Only then, if you have the risk appetite and would like a returns kicker, go for thematic and sector funds.

ARE SCHEMES OUTSIDE MINT 50 BAD?

Don’t worry if schemes in which you have 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 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, MF data tracking firm Value Research pitches active and passive funds in the same category. Hence, it is possible that passive funds such as Kotak Sensex ETF show a lower Value Research 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 here doesn’t matter.

METHODOLOGY

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 short-term needs and are a parking vehicle for your money till it gets deployed.

We use data and star ratings assigned by Value Research, an MF tracking firm. The firm ranks schemes across categories on the basis of risk-adjusted returns and assigns star ratings to them. While a 5-star fund is a higher rated fund, a 1-star fund is a lower-rated fund. Star ratings are assigned because the variance between two ranks can be statistically insignificant. For instance, two schemes ranked fifth and seventh may add the same value to your portfolio.

Star ratings depend on a fund’s risk-adjusted returns. It also pays to see the kind of risk the fund takes. Some risks are quantitative and, therefore, they can be mathematically arrived at, while few others are qualitative and we need to know the fund manager’s strategy to be able to understand them. Among the former is something called downside risk, which measures—to put it simply—a fund’s excess in returns on the downside over a risk-free rate, typically a debt scrip that carries zero risk and gives modest returns. So besides performance, Value Research also looks at the downside risk.

A risk-adjusted return is arrived at by deducting the downside risk from a fund’s return. Typically, higher the risk-adjusted return, the better is the fund, because it shows that the fund has given average to above-average return with lower risk.

WHY DOES MINT50 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 Mint50 comes in. Once we have the basic list of 3-star rated schemes, we run our qualitative checks such as a study of portfolio strategies, how fund managers manage their schemes, their pedigree and performance in rising and falling markets to be able to cull out a list of 50 schemes that we feel are best suited to perform here on. 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. Moreover, the volatility between these points also gets ignored.

For the Mint50 best funds list, go to https://goo.gl/3v5Lw-

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 27 Jun 2013, 03:02 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App