January 17, 2017

High Performing Mutual Funds – Are they best mutual funds?

When we decide to invest then our first search is to find High Performing Mutual Funds. Because we want to reach our goal as fast as possible. But are they really best funds to invest?

Let us take an example of cricket. I will consider two players to give you an idea about what I am going to share with you in this post.

First cricketer is Rahul Dravid and the second one is Shahid Afridi. Both are the best batsmen. However, on whom we rely most? Is it on Dravid or Afridi? Definitely on the WALL (Dravid) because of his consistency but not on high sixes and fours of Afridi.

Rahul Dravid’s lifetime scorecard is as below.

Rahul Dravid's Score Card

Shahid Afridi’s lifetime scorecard is as below.

Shahid Afridi Scorecard

Now concentrate on average and strike rate. You notice that the average is high for Rahul Dravid. However, strike rate is high for Shahid Afridi.

The probability of Afridi getting runs of around 23 (in ODIs) or 36 (in Tests) is high than Rahul Dravid reaching his average of 39 (in ODIs) or 52 (in Tests).

However, on whom we rely the most? It is on Dravid because of higher consistency than Afridi’s inconsistency.

You notice one more thing between these two players ODI records. Afridi played the higher number of matches than Dravid. However, he failed to attain or cross Dravid’s average.

How we connect this to equity mutual fund investments or for any investments?

High Performing Mutual Funds – How they can kill your wealth?

Let us say, two friends, Mr.Ajay and Mr.Sanjay decided to invest in equity mutual funds. They searched and found two funds are really high rated. Let us say these two funds as Fund ABC and Fund XYZ.

However, they again found that both funds average returns over 5 years are same. Now they really in a confused mind of which one to choose.

Both are high performing mutual funds and both are ranking highly in all rating portals. Also, the average 5 years returns are almost same.

In such a situation, which one to choose?

Here come the Dravid and Afridi example. Who performed consistently with lowest ups and downs? This is also be called Standard Deviation.

What do you mean by Standard Deviation?

Standard deviation is nothing but how much funds deviates from the average. I will explain you how the volatility or standard deviation will really affect your returns from below example.

I have chosen two funds named as Fund ABC and Fund XYZ. I will take 5 years average returns of both the funds, Both funds gave us the average returns of 12%. However, the standard deviation of Fund ABC is 21 and Fund XYZ is  12.

I will invest Rs.100 as a lump sum in both the funds on the same day and wait for 5 years. The results will be as below!

High Performing Mutual Funds and impact on investment

Average Returns are same and invested amount is also same. But the final returns are different. It is all because of volatility in the Fund ABC and Fund XYZ. That also for 5 years and for the invested lump sum amount of Rs.100, the difference at the end is Rs.5!

Many of us just concentrate on rate of return. However, ignore the biggest culprit called volatility or Standard Deviation. The results will astonishing or shock you at the end.

Why we consider High Performing Mutual Funds?

It is human tendency to look for BEST while buying something or investing. So obviously we go in search for BEST or high performing mutual funds.

We feel that high performing mutual funds will give us high returns. It is not true at all with the above examples of cricket players and the funds.

Also, we never estimate the risk we can take. We always feel that HIGH RISK means HIGH RETURN. But forget the simple logic that HIGH RISK will not GUARANTEE you HIGH RETURN. Instead, the high risk may lead to a positive or negative return, which does not mean HIGH RETURN.

The basic problem is star ratings of few online portals. However, we never try to understand of what method they adopted or in what way they are giving 5 or 4 star.

Moral-Never chase the high performing funds. Along with higher returns, how the fund generated that much high return is also important. Remember one thing, give the equal importance go goal as well as to the way of reaching goal.

Consistency is key rather than high performance. Refer few of my latest blog posts related to Mutual Funds.

124 Comments

  1. sir, kindly comment on HDFC capital Builder Fund

    Reply
      • sir, presently I am not holding HDFC Capital Builder , But I do not know why this fund is not included among top funds? Its, Alpha, Beta, sortino ..all are in favour of this fund. most important, its AUM is also not too much.

        HDFC Cap. builder looks strong than Mirae India, Kotak Select & Opportunities, ICICI Dyn…
        Why Basavaraj and other MF experts not consider this as top rank fund?

        Reply
        • Amol-There is no harm to any particular fund if that best suitable to you.

          Reply
  2. Hi Basu Sir

    Can you please suggest any good equity mutual fun for 2018, my investment horizon is 3-5 years.

    Reply
    • Sonal-Considering your time horizon, I suggest you to stay away from equity funds.

      Reply
      • Hello Sir,

        Then what will you suggest for the said period. If i can increase the time horizon then what will be best equity funds.
        Also now PPF, FD are all reducing interest rate so what are other investment options.
        Me and My husband are in Middle income Group and our investing in PPF and ELSS.

        Reply
  3. Hi Basu,

    I had a question on the Mid/small cap segment, if you could help me on this it would be great.

    I have been investing in my portfolio and have reduced my funds to the below:
    Birla frontline equity,
    SBI bluechip,
    Mirae asset emerging bluechip, Franklin India high growth co and
    Franklin smaller companies fund

    While reviewing my funds for 2018, I have been struggling to understand if it would make sense to make some changes to the mid/small cap segment here?

    In terms of consistency, I really like Mirae asset emerging bluechip fund and another HDFC mid cap opportunities fund and in small cap my choice is shifting from my existing Franklin smaller companies fund to either SBI small & midcap fund or L&t emerging business fund.

    Can you please give your feedback on these funds please?

    There has been a huge difference between the returns of these funds, so should I make any changes to my portfolio and if I want to add a single fund to a different goal for my new born for the next 20-25 years which one should that be from the above?

    Reply
    • Sandip-In case of Mid Cap, I stick to either Mirae or HDFC. In case of small cap, I stick to Franklin.

      Reply
  4. Hello Basu Sir,

    I’m looking forward to invest some lumpsum amount in short term debt fund. and I’m confused between 2 mutual funds:
    1. ICICI prudential short term Fund – dir-growth
    2. HDFC short term opportunities fund – dir- growth

    ICICI fund has a long duration 3.xx w.r.t HDFC 1.61, while HDFC has full exposure in financial services and doesn’t hold SOV bonds while ICICI has pretty descent exposure in SOV.

    My main aim is to generate above FD returd while minimizing the risk. I can hold it for more then 3 to 5 years.

    Thankyou.

    Reply
    • Sandeep-Stick to Ultra Shrot Term Debt Fund or Short Term Gilt Funds.

      Reply
  5. Hi basu sir,,, sir my current sip portfolio is
    Axis long tetm equity- rs 3000
    Franklin tax shield-3000
    Kotak select focus -2000
    Icici pru focussed bluechip-2000
    Hdfc balanced fund-2000
    Uti midcap-2000
    Sbi magnum midcap-1000
    Investing since early 2015, time horizon 20 yrs from now. Should I continue with these funds or you suggest some changes? Awaiting for your kind advice..

    Reply
      • Thanks for your response sir. Actually I am also investing in PPF by Rs5000 per month and Rs 10-15k in tax saving FD. I wanted to know about my mf portfolio. Kindly guide me sir,

        Reply
        • Krishanu-Funds are good. But keeping multiple funds within a same category is of no use (like Kotak and ICICI or UTI and SBI).

          Reply
          • Thanks a lot sir. As my time horizon is 25 years, should I discontinue HDFC balanced fund? Sir what is your choice SBI or UTI or any other midcap fund? As per your advice I will discontinue ICICI. Plz help me to consolidate my portfolio. Thanks a lot once again.

            Reply
            • Krishanu-One tax saving (Franklin), one large cap, one mid cap and one small cap enough. Manage asset allocation like 30:70 and for debt, you can use PPF. If you want, then continue HDFC Balanced fund also. No harm.

              Reply
              • Ok sir. Many thanks

                Reply
  6. Sir

    I am 29, PSU employee. I have following SIPs started from September 2017, so new investor here.
    1. Reliance Small Cap Fund Growth – 2000
    2. HDFC Mid-Cap Opportunities Fund Growth – 2000
    3. Kotak Select Focus (Large Cap) Growth – 1000

    I am looking for long-term investment i.e. 7 years to 25 years. Kindly provide your opinion & suggestion on my portfolio.

    Reply
  7. Hi Basu,

    Thanks for the blog.Its very informative. I need your opinion on my portfolio.

    I am 30 and married with no children. I have a house loan of around 40 lakhs and I am paying a EMI of around 37K every month for next 20 years. Apart from that I dont have any liabilities.

    Below is my portfolio.

    A)I have FDs worth 37 Lakhs. Invest around 70K every month in FD.

    B) Mutual Funds
    Birla SL Frontline Eqty-Direct (D) 8000
    Birla SL Top 100 – Direct (D) 8000
    DSP-BR Micro Cap Fund – Direct (D) 1000
    DSP-BR Opportunities Fund 2500
    Franklin (I) Smaller Co -Direct (D) 1000
    Franklin India Bluechip Fund – Direct – Dividend 1000
    Franklin India Prima Fund – Direct – Dividend 3000
    Franklin India Prima Plus – Direct – Dividend 3000

    Total of around 27K every month in SIP for next 5 years.

    C) Invested in Share market for around 10 Lakhs.

    D) 4 Life Insurance worth 5 lakhs – 20K premium every year.

    E) I dont have any PPF or NPF Accounts.

    Both my Mutual Funds and Equities portfolio are doing good.

    Goal – Child education, retirement,One more house.
    tenure – minimum 10 years.

    Questions
    a)Should I increase my monthly allocation in Mutual Funds and decrease it in FDs?
    b)Any Changes required in my portfolio?

    Please let me know your opinion.

    Thanks in Advance
    Kumar

    Reply
  8. Hi Basu,

    Thanks for the verygood artical/information, please suggestr me
    my Age 35, owned home, No Loan.
    below 19K SIP investing (since 2010 and some started in 2014)
    6k (sector fund) – 2k reliance pharma + 2k Reliance Banking + 2k IcICI Technology
    5k (ELSS) – 2k Axis Long term + 2k Reliance tax saver + 1k DSPBR Tax saver
    2k (balance) – 2k icici Balanced fund
    2k (gold) – 2k Reliance Gold Saving Fund
    2k (Diverified) – 1k icici discovery fund + 1k Reliance Equity Opportunity
    1k (Large cap) – 1k ICICI Focused Bluechip
    1k (Divident) – 1k ICICI Dividend YieldnEq. Fund

    FD – 5Lac(renew every time)
    EPF – 80K/year(my+employer contribution)
    PPF – 60k/year
    RD – 5K/month

    Goal – max possible wealth creation(child education, retirement)
    tenure – minimum 15year to max 25 year

    Please suggest is it good portfolio or suggest any modification
    + i want to invest 6k/month – which sip i add it or take new sip ?

    Reply
    • Bhushan-Do you think you need so many MF? Also, you are not specific with tenure. There is a huge gap of 15 yrs to 25 years (almost 10 years). Be specific with your goals.

      Reply
  9. Hi Mr.Basu,
    I invested 60 lakhs in sbi DAF from my father’s advise ( retired sbi employee) and i am planning to change this amount to hdfc prudence fund, l&t prudence fund and tata balanced fund for monthly regular income. Whether it is advisable to change into balanced fund or retain in the same scheme. Can you suggest any other investment schemes for bulk amount for regular income. I recently started investing 20000 sip in diversified equity funds for long term goal. Give me suggestions for bulk investment. Thanks

    Reply
    • Vasanth-SBI DAF? Also, it now became a fashion that to invest in equity oriented balanced fund for monthly withdrawal. But do remember that such funds have exposure of around 65% into equity. Hence, I don’t think it is wise to follow. Regarding your requirement, I am not sure to what extent you are depending on this monthly income. If this is the only source of income, then I suggest you to stay away from equity. Use products like LIC’s Jeevan Akshay or annuity plans even you can try postal MIS.

      Reply
      • Thanks sir

        Reply
  10. Hi Basu,

    I am investing 62,000 per month in SIP mode of more than 95 % in below Equity Mutual funds and rest in balanced Mutual funds as mentioned below.

    All the below funds i am investing in Direct mode (Without any broker) with Growth option.

    Fund Class – Equity Fund Category: LARGE CAP
    SL No.
    1 ICICI Pru Focused Bluechip Equity DIRECT GROWTH Rs 2000/Month
    2 ICICI Pru Top 100 Fund DIRECT GROWTH Rs 5000/Month
    3 SBI Blue Chip Fund DIRECT GROWTH Rs 3000/Month
    4 Birla Sun Life Top 100 Fund DIRECT GROWTH Rs 1000./Month
    5 Birla Sun Life Frontline Equity Fund DIRECT GROWTH Rs 2000/Month
    6 Kotak Select Focus Fund DIRECT GROWTH Rs 1000./Month
    Total Equity LARGE CAP Rs 14000/Month
    ____________________________________________________________________

    Fund Class – Equity Fund Category – Diversified Equity
    SL No. Fund Name Mode Option SIP
    1 ICICI Pru Value Discovery Fund DIRECT GROWTH Rs 2000/Month
    2 ICICI Pru Multicap Fund DIRECT GROWTH Rs 2000/Month
    3 Birla Sun Life Advantage Fund DIRECT GROWTH Rs 2000/Month
    4 Birla Sun Life Equity Fund DIRECT GROWTH Rs 4000/Month
    5 Franklin India Prima Plus DIRECT GROWTH Rs 2000/Month
    6 Franklin India High Growth Companies Fund DIRECT GROWTH Rs 2000/Month
    7 L&T India Value Fund DIRECT GROWTH Rs 2000/Month
    8 DSP Black Rock Oppurtunities Fund DIRECT GROWTH Rs 2000/Month
    Total DiversifiedEquity Rs 18000/Month
    ________________________________________________________________
    Fund Class – Balanced
    S.No
    1 ICICI Pru Balanced Fund DIRECT GROWTH Rs 2000/Month
    2 ICICI Pru Balanced Advantage Fund DIRECT GROWTH Rs 2000/Month
    3 HDFC Balanced Fund DIRECT GROWTH Rs 1000/Month
    Total Balanced Fund Rs 5000/Month

    _______________________________________________________________________

    Fund Class – Equity Fund Category – Small and MidCap
    S.No
    1 Mirae Asset Emerging Bluechip Fund DIRECT GROWTH Rs 4000/Month
    2 Birla Sun Life Small & Midcap Fund DIRECT GROWTH Rs 2000/Month
    3 Birla Sun Life Pure Value Fund DIRECT GROWTH Rs 2000/Month
    4 Franklin India Smaller Companies Fund DIRECT GROWTH Rs 3000/Month
    5 HDFC Mid-Cap Opportunities Fund DIRECT GROWTH Rs 2000/Month
    6 L&T Emerging Businesses Fund DIRECT GROWTH Rs 2000/Month
    7 L&T Midcap Fund DIRECT GROWTH Rs 2000/Month
    8 DSP Black Rock Microcap Fund DIRECT GROWTH Rs 3000/Month
    Total Small and Midcap Fund Rs 20000/Month
    _____________________________________________________________________

    Fund Class – Sectorial
    SL No.
    1 UTI Transportation and Logistics fund DIRECT GROWTH Rs 5000/Month
    Total Sector Fund Rs 5000/Month

    Please suggest me whether my portfoliois good or not, as i want to invest for 25-30 years in SIP for long term.

    Thanks,
    Srikanth

    Reply
    • Srikanth-First ask yourself that whether so many funds required? Whether you are investing Rs.1 or Rs.1 Cr a month, you no need to have more than 3-4 funds. Also, the biggest risk you are playing is investing without proper asset allocation. I am not sure who guided you. But you must seriously think over it. If you can’t do, then hire a planner for the same who can guide you.

      Reply
      • Hi Basavaraj,

        I am investing in EQUITY-LARGE CAP, SMALL-MIDCAP , BALANCED, SECTOR and DIVERSIFIED EQUITY funds.But what do you mean by asset allocation?

        Here i have alloted my funds accross different categories of funds, But didnt understand what do you mean by asset allocation?
        Please clarify

        Reply
        • Srikanth-Equity is ONE asset. Investing your 100% into a single asset is most dangerous. Hence, you have to use debt asset also. If you are unable to understand the basics, then either you have to learn and start investing or take the help of some experts.

          Reply
          • Hi Basavaraj,

            I am also investing in PPF and Balanced funds which comes in debt portfolio.But ,still equity Percentage is more than debt.The reason i choosen is since i want to invest for period of -25-30 years and that too in SIPmode.Then if we invest for long term for 25-30 years, i read in newspaper like risk becomes zero and investor gets benefiited by compounding.

            If still, i am wrong please clarify

            Reply
            • Srikanth-PPF is best debt product only if maturity is matching with your goal. In a case of Balanced Funds (assuming equity-oriented), only 35% is debt and rest equity. Who is saying that if long term investment means RISK IS ZERO? Compounding happens even in the case of Bank FDs also. We have the false belief that compounding only applies to equity mutual fund. Diversification is a must for any investment.
              A so-called expert not recommending you means neither he don’t know how equity market works nor he is acting on behalf of some selling pressure.

              Reply
              • Hi Basavaraj,

                Thank you for the advice. No Expert advised me,I read in Newspaper that In Equity Mutual Funds if someone made long term investment risk almost becomes Zero , and they said ,like check history of mutual funds performance as a proof for their analysis.

                Any way, Since you advised to diversity the funds, Please suggest me how to diversify the portfolio as i have 62K per month to invest monthly. Please advise all possible scenarios to balance, diversify and make money in best possible way.

                Thank you in advance.

                Reply
                • Srikanth-Such media items wisely pick the time horizon so that they use it wisely for the story they are creating. If someone not understanding the concept of diversification, then either he is dumb or acting like dumb. Stay away from such media items.
                  Regarding diversification, refer my post “Top 10 Best SIP Mutual Funds to invest in India in 2017“.

                  Reply
  11. Respected sir ,
    Recently I have started ELSS in
    Five fund like sip 1000 per month
    Named : HDFC taxsever growth plan
    BIRLA Sun life tax relief 96
    growth
    DSP blackrock tax saver
    fund regular plan growth
    Motilal oswal most focused
    multicap 35 fund
    Franklin India taxshield
    growth

    What is your prospects of choice about fund
    And when we switch fund

    Reply
    • Jay-What is your time horizon? What asset allocation you followed? On what basis you selected these funds? Why did you feel sudden doubt about your decision?

      Reply
      • I am sure on choice of fund and my time horizon is 10-15 year .
        I want to know expert view on choice of my fund that way I have asked
        Thanks

        Reply
        • Jay-You just started, give time of around 1-2 years, check the fund performance in respect to benchmark and then decide.

          Reply
  12. Hello SIr, Please suggest me wheter I should Invest my Rs 8 Lakh on LIC Pradhan Mantri Vaya Vandana Yojana (PMVVY) for my Mother or should I continue to Invest in Mutaul Funds unstead of Investing in PMVVY

    WHich one is good as any how , I am giving my mother 6000 Rs monthly

    Reply
  13. An Excellent article…

    Learned a lot……

    Thanks

    Reply
  14. Superb.
    Really really informative.
    Very well explained with perfect examples.

    Reply
  15. I want to invest Rs 40000 every month for next 2 years keeping in mind that I will need money after 10 Years

    Please let me know where I should Invest .

    I have already Invested in PPF and FDs and also in Mutual FUnds.

    Let me know in which Mutual Fund now I should Invest

    Reply
  16. Hi Basu,

    Thanks for very informative post and it sure help a beginner to understand the metrics in selecting the right funds. After reading lots of article what one feel is lack of experience in investing itself. May i request you to write a post comprising the whole life cycle of MF investment? It will surely help a beginner to pick a fund based on goal vs asset allocation. Here I see most of comments not understood the basic asset allocation. Choose any fund, returns, AMC cost of entry/exit/tax, tenure, and compare its real return vs goal! Thanks for your time.

    Reply
    • Jagan-True and surely I will write the post on your suggestion. Request you more inputs for the same from your end.

      Reply
  17. Hi basu,

    I have heard that we can switch from one mutual fund to other. is this true.

    if it is true. can i switch from icici pru vale disc. to icici pru focused bluechip?

    Also how about the units gained till now from icici value disc.

    please reply

    Reply
    • Abhee-Switching is nothing but redemption from one fund to investing in new fund. This can be done at any point (subject to exit load and taxation).

      Reply
      • ok.thanks

        recently i came across one article wherein i was mentioned switching is possible from one fund to another within same amc without reedemtion of units.

        so thought this as agood option when the existing fund is not performing well

        Reply
          • ok. i heard there is switch option with amc in which we can switch from one fund to other without redemtion of units.

            may be i am wrong.

            thanks.

            Reply
            • Abhee-They may not be using the word REDEMPTION. But it is REDEMPTION ONLY. Just cross check with that AMC and let me know which way they do so.

              Reply
              • Hi basu,

                this i haven’t heard from amc, i came across one article from jagoinvestor blog” 33 mutual fund myths” wherein myth 30 said the switch without redemption thing.

                there is still confusion. May be i am not getting it properly.

                Reply
                • Abhee-It is nothing but STP, where it is said that you can’t redeem it. But when switch from one fund to another fund (within the same fund house or different), for the existing fund it is redemption and for the new fund, it is an investment. Refer the comment section of the said post, the author mentioned the same that exit loads etc apply in this case also.

                  Reply
                  • thanks. got it.
                    but when this options are most useful

                    Reply
                    • Abhee-You can use STP when you feel the fund is underperforming. Other than this, I think STP is the trick created by AMCs and advisers to earn the commission continuously.

  18. Hi Basu, I visit your webpage once in a while to check out the investment atmosphere in India since i am an NRI and have very limited options in investing in India.  Thanks in advance for dolling out quality advise for free, for otherwise uninformed investors like me.  Looking for some advise today, I have an Ultra long term FD in an Indian bank maturing soon which is to the tune of about 8 lakhs (my only investment in India) and was thinking of moving it to an investment vehicle which may give me slighlty more interest/return than a conventional Fixed Deposit (since FD interest is at historical lows).  I dont need this money for the next 5-10 years or more, Can you give me some suggestions, may be a Balanced Mutual Fund or Equity Fund ? or any other vehicle which is of only moderate risk, thanks in advance

    Reply
    • Divakaran-Debt to Equity in the ratio of 60:40. In debt, select either ultra short term debt funds or short term gilt funds. In equity, one large cap and one mid cap enough. So totally 3 funds. That’s it.

      Reply
  19. Hi Basu

    I want to invest lumpsum in few mutual funds. Is the mutual funds suggested by you in the post “Top 10 Best SIP Mutual Funds to invest in India in 2017“ holds for both SIP and LumpSum

    Which are the debt funds where I dont have to pay the tax on returns

    Abhishek

    Reply
  20. Good day sir,
    I just started investing in sip of following funds for long term of 10 years?.
    SBI blue chip direct growth 2000
    BSL Frontline equity direct 1000
    SBI Magnum midcap direct 2000
    Canara robeco emerging equities 2000
    L&t midcap fund direct 2000
    SBI multicap direct 1000
    L&t India value fund 2000
    ICICI prudential value discovery 2000
    Franklin High growth companies 1000

    I am planning to increase in the future.
    Any advice and suggestions on this

    Reply
  21. Hi Basu,

    I have done investment for the following MF through SIP, can you please help me if I am in the right track.

    1) HDFC Mid-Cap Opportunities Fund – Regular (1500 SIP – From 2015 June)
    2) Franklin Build India Fund (1000rs SIP From Jan 2017)
    3) Franklin India Prima plus Fund(5000 SIP From Nov 2016 — Wife Invested target for 5 years)
    4) ICICI Pru Value Discoery Fund ( 4000 SIP From )
    5) Kotak Infra & Eco Reform Fund (1000 SIP)
    6) Mirae Asset Emerging Bluechip ( 2500 SIP)
    7) SBI Blue chip fund (5000 SIP — Wife Invested target for 5 years)

    Regards
    Girish

    Reply
    • Girish-Where is your debt portfolio and what is your time horizon?

      Reply
      • Hi Basu,

        Thanks for reply. I have not invested in any DEBT fund, and my time horizon is 5 years from now. I have invested around 15000 to RD for 5 years from last May(2016) and I have PF of 10000 every month. Can you please help me in choosing right fund towards Debt portfolio. I can start investing around 2000 from April.

        Thanks
        Girish

        Reply
        • Girish-If your time horizon is 5 years, then don’t touch equity. Be comfortable with debt.

          Reply
  22. Hi Basu,

    Your articles are very informative and it is helpful to investor like who doesn’t know much about how we efficiently we can do the investment.

    I have 1 question here. I came to know from one of the HDFC person that if we invest every year 150000/- rs for 5 consecutive year then from 6th year we will be getting 1 lakh every year and after 20 years we will be getting 50 lakhs as lumsum.
    The investment they are going to made to equality linked scheme. Do you know any of these products or its good to invest in this kind of fund?

    Regards
    Anand

    Reply
    • Anand-He is selling you the ULIP and the guy who claiming returns will not be on same seat after 2-3 years. Hence, invest at your own risk not by believing on that Bank RM.

      Reply
  23. I want to invest in Equity Mutual funds with a horizon of 10 years. Which fund should I choose as SIP. ( ICICI value discovery, Birla sunlife equity, Fraknlin india prima plus and ICICI or HDFC balanced fund —> SIP of 2500 each is what currently I am thinking)

    I too want the lumpsum investment (5L). Debt funds has LTCG and hence I want to avoid it. Any MF where returns after 1/3 year are tax free and are less risky.

    Reply
  24. Good evening Sir,
    I am 40 years old self employed persons. I had a lic (Annual premium Rs 18000) TermInsurance For 25 years from 2014 30 lacs. Health insurance. AP Rs 5000 . My Annual Income is less than 7 lacs.I had no liability till date. I have only one son of. 8 years.up to date i have no FD and RD and no investment. Bank balance is nil. As recently I had purchased a land worth Rs 12 LACS.and car Rs 4lacs. My monthly expense is nearly 35000. Sir i want to invest ten thousand per month in mutual fund sip For 10 years. Just to secure the life of my wife and for my son education I will take a moderate risk. I will be grateful if you please diversify the best fund from different companies for me along with the amount.

    Reply
    • Raju-Thanks for your sharing and belief on me. However, the whole financial planning can’t be done with mere few lines of your sharing. Its dangerous for you than ME.

      Reply
      • Thanks for your quick reply. Sir I design My portfolio as follows
        Hdfc top 200 Rs 1000 pm
        Birla SL Advanced fund Rs 2000 pm
        Franklin prima fund Rs 2000 pm
        HDFC small cap 2000 pm
        DSP BR micro cap 1000PM
        HDFC PRUDENCE FUND 1000pm
        Franklin india build fund 2000 pm.
        Total investment. Ten thousand pm
        Duration. 10 years
        Is the selection is correct ? Or you want to make some changes. Sir Please help me in this regards. I need your advice.

        Reply
        • Raju-For 10 years goal, what allocation you preferred between debt and equity? Also, how you selected these funds?

          Reply
          • Sir i want to invest 3:7 debt to equity for 10 years 10k/pm please suggest some best funds

            Reply
              • Goos evening sir
                Finally I had made an investment in MF through Sip. I need your help if your correction if i m incorrect.
                Dsp black rock 1000/-
                Hdfc mid cap opportunities 1000/-
                BL equity 2500/-
                SBI BLUE CHIP 1000/-
                Franklin templeton family solution 2500/-(I told bnp paribas agent to have a frnkln prima fund. But they wro frnklin fmly solution in their own in the cheque.I queried Why they are writing frnklntempleton. Fmly solurion instead of frnkln prima fund? they told me that frnkln fmly soln is not a fund it is a service. ultimately Through this service I can get frnkln prima fund. I can check through statements. Sir pls help me weather there is some thing is goingwrong with me?

                Reply
                • Raju-Where is your debt allocation? which DSPBR Fund? So many unanswered questions.

                  Reply
  25. While standard deviation depicts how much the returns have deviated from the mean level, but it may not necessarily mean that a fund with low standard deviation is good and vice versa. If a fund with high standard deviation delivers much higher returns than the one with a low standard deviation, then the deviation may not matter much. A better measure is the risk-adjusted returns, which states the returns per unit of risk.

    Reply
    • Amit-Why for the sake of HIGHER RETURNS I should opt for the fund which have higher standard deviation? Realistic expectation from equity fund is enough to reach financial goals than chasing returns or star performers.

      Reply
      • Sir from where i will buy the MF? Is it safe to buy from broking house like IIFL or bnp paribas. Or i will purhase direct?

        Reply
  26. Dear Basu. First I congratulate you for your selfless service towards increasing the financial literature.
    Iam beginner in the mf investments. But, mycams and mfuonline made me to think its easy to operate. I have few querries:
    1) I have access to online account and time to follow sensex movement. So, instead of following SIP method to invest, is it not better to invest in mf schemes to follow sensex/nifty till 1pm and then invest through mfuonline, if index is falling. For rupee cost averaging, I can select a period, say 10 th 15 th of every month and invest on any day index seems low with a rider that on 15 th I must invest. –> Is it not a good idea than mandating 15 th of every month as SIP day
    2) Is there any bullish tendency in market during any band of days ( my colleague says 1-5 th of every month is bullish, as salaried class invest including NPS investment which is also a MF) or or any particular day/ dates to wait ( like fridays or mondays or day before/after holidays)
    3) How and where to find live P/E ratio, as I came across Flexi SIP schemes, is there any thumb rule to figure out PE and invest more at any particular day/s as Iam planning to invest on my own.
    These querries are pestering me as I seem to enjoy investment through online aggregators. I also request you to write an article on dos donts of lone investors through online aggregators it may include thumb rules and scientific rules

    Regards

    Reply
    • Suru-1) Enough studies have done and provided that timing the date for your monthly investment is just waste.
      2) Ask him or she, what % of MF SIPs during 1st to 5th constitutes the daily trading volume in NSE or BSE? It is just false claim. Never do the timing the market. The winner is always the one who invested for long term than these so-called research experts.
      3) LIVE PE?? Are you INVESTOR or TRADER? If Trader, then you can use ETF..

      Reply
  27. Find your website very informative.

    Would like you to re look average return calculation of MF. This is not the same as batting average calculation of cricketers. In the latter case runs are not added to total runs of previous innings unlike MF.
    Average return for ABC = (166-100)x100/100×5 = 13.2%; for XYZ = (171-100)x100/100×5 = 14.2%.

    Std deviation does reflect volatility, so yes it does have a bearing on selecting MF or any investment for that matter. A less volatile MF greatly increases the chance the year or time the investor wants to redeem, the value of the investment is not low.

    Reply
    • John-Here my point is not average but the volatility and how it can affect your end earnings.

      Reply
  28. Hi
    I started investing in mutual funds a year ago and Tey are

    F.I high growth comp fund 5000 /-
    F.I smaller comp fund 5000 /-
    SBI small&midcap fund 5000/-
    Mirae asset emerging bluechip 5000/-
    Axis long term equity fund 5000 /-

    Iam looking to invest for long term 10+ years . Should I continue with above funds ?? Or let me know if any changes that needs to be done

    Thanx in advance

    Reply
    • Siva-What asset allocation you are following between equity and debt?

      Reply
  29. Hello sir,

    First of all thanks coz ur blog has helped me in planning my financial life.

    I am 29 yr old businessman having a year old baby girl living in ahmedabad.

    In last 2 months,

    I have started my family health insurance with religare.
    My parents health insurance is with oriental of 5 lakh.
    Planning a term insurance with max soon.

    As a debt fund , I have started sukanya plan this month and ppf last month.

    Other than that have an FD of 16 lakh.

    For my business need I have kept 10-15 lakh in separate current and saving accounts.

    Reply
    • I have started SIP
      Of 1000 each and will increase it later

      1 birla SL frontline equity fund G
      Franklin India prima fund G
      UTI dynamic bond fund Reg G

      Are my selection right?

      Its for long time more than 10 years.

      Your suggestion please sir.

      Is my planning correct , if there is any correction please suggest .

      Thank you

      Reply
      • Ripel-What is the allocation between equity and debt? Equity seems fine, but why you selected dynamic bond fund in debt category?

        Reply
        • Sir,

          I was doubtful but after going by review from funds India executive and checking its 5 yr return in value research, I choose to go with uti dynamic.

          If you suggest , I will withdraw my fund from uti after a year or 2 and will go for a different one.

          Regarding allocation 70 % equity and rest debt in MF. As I can invest for 10 yrs.

          Please suggest me if I am lacking somewhere.

          Reply
          • Ripel-In my view it is best to use Ultra Short Term Debt Funds rather than these risky dynamic funds. Try to allocate around 60:40 between equity and debt.

            Reply
            • Ok sir.
              Thanks

              Reply
  30. Hi Basu,

    I have been a competent reader of your blogs. Its nice of you to share your knowledge enlightening others on financial matters.

    Firstly I am 40 working in a private firm. I have no kids and all I save is for me and my wife.

    Started investing in Mutual fund a year back as I am a fresher started with HDFC Balanced Fund with a monthly SIP of Rs 2500/-

    Its for a long term more than 10 years.

    Do you advise me to diversify my investment in another mutual fund like a large cap or small cap fund or continue increasing my share in this balanced fund as my investment is for a long term

    For debt I have been investing in PPF 5000/- and have 2 lakhs in FD as contingency.

    Reply
    • Awaiting reply on this

      Reply
      • Ajith-If you have separate portfolio for debt, then why a balanced fund? Instead, you can select one large cap, one mid cap and one small cap.

        Reply
        • As a starter in mutual fund I started with balanced fund a year back.so do you advise me to continue to be invested in this or come our and invest in one large cap, one mid cap and one small cap?

          Reply
          • Ajith-I already pointed. If your debt portfolio is already managed separately, then by investing in balanced fund do you think debt portfolio allocation increased? That is the reason I said if debt is separately managed, then one large cap, one mid cap and one small cap funds enough.

            Reply
            • Thank you Basu..as I invest 5000/- periodically in PPF will come out of the balanced fund and split my investment in one mid cap and one small cap fund.

              Reply
              • Ajith-Also one large cap (hope you missed that to mention 🙂 ).

                Reply
                • sure..thank you much

                  Stopped HDFC balanced and invested below.

                  Large Cap -Franklin India Blue Chip – Rs 2500/-
                  Mid Cap – HDFC Midcap Opp Fund – Rs 2500/-
                  Small Cap – Franklin India Smaller Companies Fund – Rs 2500/-

                  Reply
  31. hi. great analysis. I think proportionate fund allocation in various instruments is the key. I would like your opinion about asset allocation in NPS. Considering the way equity funds of nps are performing do you suggest to invest in them or to reduce the E component and increase allocation into G and C? Since NPS is just one of the very many retirement fund, equity will be taken by investing seperately in other bluechip/diversified funds.
    what is your opinion on C and G classes. which is better?
    What is your take on the rationale of the “auto” chioce? is it good to just opt for that and invest remainder in diversified equity funds.
    I am looking forward for a horizon of 15-20 years for building the fund

    Reply
    • Satish-Whether they are C or G, look at maturity of underlying assets. You notice that their maturity is long term. I am uncomfortable with kind of long term debt. Instead, I feel comfort with ultra short term debt funds. Also, regarding auto choice, I not feel my money be allocated in someone’s hand. Hence, to control best option is MF than so called pension products.

      Reply
  32. That cricket example with “Average” vs “Strike Rate” is nice. Whenever I think about the “performance” (of ELSS ,particularly), it makes me very curious to think about “Axis Long Term Equity Fund” which topped the charts very early but fell dramatically last year. There is something called “Beginner’s luck” which I firmly believe in. So, the investors who invested in 2014/2015 looking at spectacular returns may have disappointed in 2016. Just read the investors comments here https://www.valueresearchonline.com/funds/portfoliovr.asp?schemecode=10826 . Basically, this reminds me the words of Benjamin Graham who says “Mr. Market” is always right but it is just the participants who are wrong.

    No conclusions (either +ve or -ve) to be derived from my comments about any fund. It just really a random thought that I’ve been getting about this fund particularly whenever I read about “performance”.

    Reply
    • Sreekanth-Thanks for sharing. But 1-2 years of underperformance is always be there in all funds. We must act maturity than taking action on swiftly manner.

      Reply
  33. Hi Basu,

    Great explanation provided ! Keep it up.

    I am investing 3k in “Invesco India Tax saver fund” and 3k in “Reliance Tax saver ELSS fund” respectively via SIP. I would like to remain invested for 5 years or so. Please suggest if I can continue with both of them considering the Tax saving and Growth purpose both. Or you suggest to switch to any other like ?

    Reply
    • Nishant-Both are doing good (as of now). Hence, you can continue.

      Reply
  34. Very good

    Reply
  35. Dear Sir,
    Very Nice article indeed. Very Good and easy to understand explanation.

    regards
    RAJESH PAI B

    Reply
  36. Hello sir,

    This article is awesome. Today I knew about your blog, really your article is very funny along with good knowledge(1000 likes).

    I have been started to invest in mutual fund for 8 months. Please suggest if any correction is required in my portfolio;

    1. ICICI DISCOVERY FUND
    2. SBI BLUE CHIP
    3. SBI PHARMA
    4. SBI MAGNUM MULTICAP FUND
    5. AXIS LONG TERM EQUITY FUND(FOR TAX PURPOSE)
    6. DSP BLACK ROCK MICRO CAP FUND

    Reply
    • Gautam-Within 8 months of investment, why you felt the doubt? Also, without knowing your goal details and asset allocation you preferred, it is hard for me to guide.

      Reply
      • Hello sir,

        Thanks for your early reply. I am a govt. employee (age:27 years) and actually no more idea about asset allocation . I want to invest in mutual fund only for long tem capital gain (more than 8 years ). For short term I prefer to FD & RD.

        MY plans

        1. I have a term policy of ICICI
        2. NPS account for retirement (It is compulsory for me as govt, employee)
        3. For Emergency(one FD)

        Please suggest regarding mutual fund in respect of my portfolio. I have to continue or switch to other plan.

        Reply

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