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Business News/ Money / Personal Finance/  Top focused equity mutual funds to invest in 2023
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Top focused equity mutual funds to invest in 2023

Some mutual fund houses have launched focused equity funds in the past to enable their investors to benefit by putting their money in a concentration of stocks chosen for their merits and market opportunities.

Which focused equity funds should you invest in?Premium
Which focused equity funds should you invest in?

“Focus strongly; focus well" is the mantra that most successful people count on. Indeed, the ability to focus can make or break your success in life. However, does this age-old adage hold true for mutual funds too? For this, we must learn about our mutual fund investments and their respective portfolios. Do your portfolios overlap?

Are you one of those investors who invest largely in large-cap funds to escape the jarring volatility when the market crashes or are you the one betting money on small-cap funds that can create a humongous corpus if you are willing to stay put for the next two to three decades? More than accumulating stocks and funds of varying market caps, have you thought of accumulating your focus on a set of stocks that will help you yield high returns in the future?

Being focused helps, which is why some mutual fund houses have introduced focused equity funds that focus on a set of stocks across market capitalization. Take, for example, the recently launched ITI Focused Equity Fund that would invest in a concentrated portfolio of equity and equity-related instruments of up to 30 companies. The product is suitable for investors seeking appreciation in the long run. Most investments are in equities as evident from the details shared in the fund’s Scheme Information Document (SID).

InstrumentsIndicative Allocations (% of net assets)Risk Profile

Maximum

Minimum

High/Medium/Low

Equity and Equity Related Instruments (of not exceeding 30 companies across market capitalization)

100%

65%

High

Listed Preference Shares

10%

0%

Medium to High

Debt and Money Market Instruments

35%

0%

Low to Medium

Units issued by REITs and InvITs

10%

0%

Medium to High

Other mutual fund houses have also launched focused equity funds in the past with some of them yielding really good returns. The following table lists some popular focused funds with their past 10-year returns.

Name of the Fund

10-year returns (in %)

Nippon India Focused Equity Fund

20.40

Franklin India Focused Equity Fund

19.25

Quant Focused Fund

19.01

SBI Focused Equity Fund

17.13

DSP Flexi Cap Fund

16.75

HDFC Focused 30 Fund

16.36

Sundaram Focused Fund

16.10

ICICI Prudential Focused Equity Fund

15.72

Aditya Birla Sun Life Focused Equity Fund

15.71

Motilal Oswal Focused Fund

15.48

JM Focused Fund

15.36

Axis Focused 25 Fund

14.83

Bandhan Focused Equity Fund

13.30

Source: MoneyControl

Deciding on modus operandi

Many investors still question why they must put their earnings in these funds. Most importantly, they ask if allocating a portion of these earnings to these funds would help them create wealth in the long run or the estimated corpus.

Also, whether they must invest in a lump sum or systematic investment plans (SIPs) are questions that beget professional advice.

Viral Bhatt, Founder, Money Mantra said, “Whether to invest in a lump sum or through SIPs in focused equity funds depends on your personal financial situation and investment goals. If you are investing in focused equity funds, it is important to consider the following factors:

The fund's objective: What is the fund's objective? Is it to generate capital appreciation or income?

The fund's track record: How has the fund performed over the past few years?

The fund's fees: What are the fund's management fees and other expenses?

The fund's liquidity: How easy is it to buy and sell shares in the fund?"

Should you invest in focused equity funds?

The idea of putting money in these funds is that most of these fund schemes adopt a mix of top-down and bottom-up investing approaches while ensuring adequate diversification across various industries and/or sectors and/or market capitalization.

There is no particular scheme approach, which means that the fund manager scans the market for opportunities and evaluates investment opportunities based on the stocks’ merits and growth potential.

Mahesh Mirpuri, Mutual Fund Distributor, Invest Mutual shared, “Focused funds as a category have not done better than flexi cap funds. Due to their very nature, an investment in such funds requires conviction in the fund manager and her style. If some of the high-conviction investments don’t perform for a while, investors can get nervous."

The selection of stocks in this universe is meticulous, focusing on companies with strong business models and sustainable competitive advantages over their rivals. Additionally, some of these funds may allocate a portion of their total assets to debt and money market securities. Investment in debt securities is influenced by factors such as credit quality, liquidity, interest rates, and future prospects.

Are all these funds the same?

No, none of these funds is the same, thus, explaining their varied portfolios and returns over a period. Though the investing strategy may look the same, a lot depends on individual fund managers’ decisions and investment styles. There is no safety net or guarantee promised, thus, hinting at the funds’ inherent volatility.

Before making an investment, it is important for an investor to evaluate the underlying investment strategy of a fund. This assessment will help in selecting the appropriate fund based on factors such as risk tolerance, investment horizon, and liquidity requirements.

Including these funds in your investment portfolio can provide various advantages, but the suitability largely depends on your risk profile and financial outlook. The decision on which funds to choose is influenced by the desired level of returns and the amount of money you aim to accumulate within a specific investment timeframe.

 

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Investors' journey of investing in equity
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Investors' journey of investing in equity

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Published: 20 Jun 2023, 09:16 AM IST
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