[sgiitk]

@fine69; Not really as long as you choose a reputable fund from a reputed fund house. I often do not bother for years. Choosing to micromanage is like timing the market - impossible.

[S_U_N]

Originally Posted by fine69

Based on the logic similar to that of SIP, why would it NOT be a good idea that someone picks up the top 2-3 funds in 3 or 4 different MF categories. I mean funds with high performance over the last 5-6 years are most likely to continue on the same performance levels. Instead of narrowing down on One MF per category, if someone picks 2-3 funds, by the law of average, the risk gets minimized, or does it not?

EDIT: One more question, valueresearchonline also shows the performance of worst funds and none of the worst funds in equity category (except infrastructure) have a negative return (considering 5 year performance). Does valueresearchonline consider all MFs available in market for such calculation? Is no one actually losing money over a 5 year period?

I have observed based on limited analysis, that if you take two funds in same category say "Large cap" or "Sector - Banking & Finance", they invest in the same companies predominantly. So, if those stocks perform well, you will find good returns from both the funds, else both will go down at the same time.
In short, there is no diversification.

[ansumaan]

+ 1 to Sgiitk & S_U_N. The only difference between 2 funds would be the Fund manager & his skills to mobilize the money to get the best out of it.
Though the difference for the "diversified large cap finds" would be minimal on a longer term, you can see some difference in short term.
With Automated SIPs in place I don't think it would be a big pain to invest in 2 funds from each category. Over all 5-6 funds shouldn't be difficult to manage .

Happy investing.
After all its fun to see your money working hard.

[fine69]

Thanks all for your inputs. I also looked at a couple of funds performance vs different indexes and with respect to mutual funds, there is a very strong correlation between mutual fund and index. Does it mean that when the market crashes so would the top 20-50 companies and somebody investing in blue chip funds would also be affected.

I understand the SIP logic that once the market revives the mutual funds would also come back up and give great returns but am I right in the understanding that MFs have diversified portfolio and everything but are still strongly related to market performance only.

[fine69]

Another question, there are funds which have an excellent 10-yr rank but have most of the risk figures (alpha, std deviation, beta, sharpe ratio etc.) not in its favour at this moment. Then I look at certain funds which do not have a very good 10-yr rank but have improved rank in the last 5-yrs and further improved rank in the last 3-yrs.

Such funds also have the risk numbers in their favour. Does it look like a good way of looking at the funds i.e. a fund with acceptable risk numbers, and improved ranking from 10 to 5 to 3yrs?

[sgiitk]

@fine69; As the cockney will say, You pays your money and takes your choice. I fins valueresearch ratings not conservative enough. So the adage is that modulate the recos with your own judgement. I avoid funds at 2* or lower. The rest are all fair game.

[fine69]

Originally Posted by sgiitk

@fine69; As the cockney will say, You pays your money and takes your choice. I fins valueresearch ratings not conservative enough. So the adage is that modulate the recos with your own judgement. I avoid funds at 2* or lower. The rest are all fair game.

Ok, let me try to be specific in my question.

HDFC Top 200 - One fund that 9 out of 10 folks have recommended me. It has 1st 10-yr rank. Returns are the best in the category. If I didn't know anything else there looks like no reason to not opt for this fund. I mean great returns and almost everybody is recommending it.

However, if I look at the fund's annual or quarter on quarter performance - this fund did exceptionally well in the first 5-6 years however the fund's last 5 or last 3 yr performance is nothing to write home about. Not to mention the risk figures of this fund, most of which are far from category average.

Hence, my question is that while long-term performance is definitely a factor (quite significant it seems) in VRO rating and ranking but if the fund hasn't done well in the past 3-5 years would you learned folks still want to recommend such funds. If yes, then please educate me because I'm lost as to what I'm missing in my interpretation of data?

[Parth46]

Originally Posted by fine69

Ok, let me try to be specific in my question.

HDFC Top 200 - One fund that 9 out of 10 folks have recommended me

HDFC Top 200 is one of the classic examples of being a victim of its own success. The fund did exceptionally well for quite some time till a few years ago, and with its great success attracted a huge influx of funds, and lost the nimbleness and agility that made it so good in the first place.

Something similar happened with SBI emerging businesses fund, took off really well with sustained performance, attracted a tidy inflow of new investor money, and even though is currently giving good returns, is still behind the category average.

Bottomline is, please use all these ratings and ranking at an indicative high-level only. If you can choose blue-chip funds from reputed AMCs, and invest regularly over long periods of time, you're bound to create wealth in the long run. Many funds go thru cylical periods and of course that's the beauty of the dynamic MF industry we have. No fund can claim to be the safest, the best performing and the top ranked, all at the same time.

[sgiitk]

I tend to like HDFC offerings, and am in HDFC Equity and Prudence, and may add another. So the Top200 should also be good. As for this category my preference is IDFC Premier Equity but they are only accepting SIPs, to prevent untrammeled growth.

[gaurav_chopra04]

In the Large cap/bluechip category I would pick ICICI Prudential Focused Bluechip Equity Fund, Birla SL Front Line Equity, or Franklin India Prima Plus over HDFC top 200 right now. Of course, HDFC will catch up with the others in the near future but its not the best of fund to buy for now.

Even in ELSS, talking about funds with over 60% large/giant cap holdings, the HDFC tax saver has significantly under performed in the last five years compared to peers such as ICICI pru tax plan, Franklin India tax shield or Axis Long term equity (Axis technically not Large cap - most companies were mid cap that became large as market cap increased).

If I am to buy HDFC right now, it would be mid-cap opportunities, balanced or prudence fund.

[sgiitk]

The preferred flavours are changing all the time. As for ELSS I am in Franklin India and ICICI Pru. I have five folios to manage - mine, my wife's, my HUF, my son and daughter-in-law. While the horizon is short in the first three (the PPF of the HUF expires in two years), the gen-next has to be long terms. Ironically I am keeping them 2/3 in PPF since this ensures better fiscal discipline.

[RiGOD]

Originally Posted by gaurav_chopra04

In the Large cap/bluechip category I would pick ICICI Prudential Focused Bluechip Equity Fund, Birla SL Front Line Equity, or Franklin India Prima Plus over HDFC top 200 right now. If I am to buy HDFC right now, it would be mid-cap opportunities, balanced or prudence fund.

Originally Posted by Parth46

Bottomline is, please use all these ratings and ranking at an indicative high-level only. If you can choose blue-chip funds from reputed AMCs, and invest regularly over long periods of time, you're bound to create wealth in the long run. Many funds go thru cylical periods and of course that's the beauty of the dynamic MF industry we have. No fund can claim to be the safest, the best performing and the top ranked, all at the same time.

Originally Posted by sgiitk

The preferred flavours are changing all the time. As for ELSS I am in Franklin India and ICICI Pru.

I'm new to the MF world and planning to invest 16k/month as SIP's in the same. I'm thinking about going for one each of Large Cap, Multi Cap, Balanced and ELSS.

Here are the funds I've shortlisted to go for:

Large Cap : ICICI Prudential Focused Bluechip Equity Fund or Franklin India Prima Plus Fund

Multi Cap : Franklin India High Growth Companies Fund

Balanced : HDFC Balanced Fund

ELSS : Franklin India Taxshield Fund or Axis Long Term Equity Fund

My queries are :

1. How should I split up the 16k among these sectors? My time horizon is 10+ years.

2. Will there be significant overlap if I go for both Large Cap and Multi Cap at the same time? Should I replace Multi Cap with with a Mid & Small Cap like Franklin India High Growth Companies Fund?

3. What is the best way to start and manage MF's online? I mean, it should be preferably cost/commission free as well as easy to manage.

4. Are the above mentioned funds good enough? Any suggestions regarding better funds are welcome!

Hope you guys will help me out here


And special thanks to sgiitk. It's his proper advice that set off my research for MF's in the right path

[sgiitk]

Now my suggestions

1. Large Cap: FT Blue Chip. Conservative but steady.
2. Multicap: PruICICI Dynamic, or HDFC Equity
3. Balanced : HDFC Prima has been the king for a long time. PruICICI Bal Adv is another possibility. These are both Equity oriented funds.
4. Mid/Small cap: IDFC Premier Equity or Templeton Equity Income. IDFC is only accepting SIP.
5. ELSS: You are fine with FI Tax Advantage. You have to balance this with PPF/PF so as to hit the 150k annual limit.

Initially, I will be biased towards Multicap / Balanced and then expand. There are specialized funds also.

[Parth46]

Originally Posted by RiGOD

=====
Here are the funds I've shortlisted to go for:

Large Cap : ICICI Prudential Focused Bluechip Equity Fund or Franklin India Prima Plus Fund

Multi Cap : Franklin India High Growth Companies Fund

Balanced : HDFC Balanced Fund

ELSS : Franklin India Taxshield Fund or Axis Long Term Equity Fund

=====

Hope you guys will help me out here

I think you've got a pretty good split here in terms of various MF categories and the funds are good as well. If I were you, I'd choose Tata Balanced instead of HDFC but I'm just nitpicking, HDFC is also right up there in balanced funds. In ELSS, if you're aggressive can also consider Reliance Tax Saver as well along with FIT.

You can have an even split of 4k each in 4 funds, and should go for direct versions i.e, directly with the AMC's. I've signed up with most of these and if you're KYC compliant, you can do it fairly easily. The extra odd percent and brokerage free returns are well worth it in the long run of 10+ years.

Setup a free account with MoneyControl or Value research online. I have both and can recommend either, to track your investments on a regular basis, but not too frequently, give it time to grow.

Overall, a pretty good plan to get started - now be patient for 10 years and beyond, don't redeem unless absolutely necessary, keep regular track for performance, don't listen to market noise, don't get worried by market movements, keep up your boring SIPs, have faith and you're well on your way to build wealth in the long run.

Let me know if I can answer anymore questions at all -happy to help.

EDIT _ SGIITK sir's suggestions are really good as well. I would consider each input seriously and take a call on what works best for you, if I were you.

[nareshov]

I've crossed my 1.5L 80C limit by buying 'extra' 25k ELSS in late March '14. What are my tax implications here? I had already submitted the relevant investment proofs to my workplace's accounts dept. in late Feb itself.