[Small Bot]

Originally Posted by vijaykr

On @SmallBot's point on consulting a financial advisor, do take a look at this website: https://www.feeonlyindia.com/

Yes, I was referring to them. I got that from the Freefincal website.

[skumare]

Quant Small Cap fund - risk parameters
While the returns are not bad for a small cap fund, it is rated 3 stars by Valueresearch, want to understand how these ratings are arrived at? I see the churn rate (150%+) may probably be one factor, what are the other factors?

[n_aditya]

I've got an SIP for the last two years with Tata Digital India fund (Direct Plan-Growth), link - https://www.moneycontrol.com/mutual-...growth/MTA1147.

The customer support rep called me last week and said that since recession is expected and this fund primarily invests in Indian IT companies, I should consider stopping the SIP and move to another fund.

He sent me the following options to consider:

1. Tata Resources & Energy Fund - Direct Plan - Growth (link): No Crisil rating. SIP returns over the last 2 years looks good.

2. Tata Business Cycle Fund - Direct Plan - Growth (link): No Crisil rating. SIP returns over the last 2 years looks good.

3. Tata Large & Mid Cap Fund - Direct Plan - Appreciation (link). Crisil rating - 3 stars. Pretty good returns over the last couple of years.

4. Tata Mid Cap Growth Fund - Direct Plan - Growth (link). Crisil rating - 3 stars. Pretty good returns over the last couple of years.

5. Tata Multicap Fund - Direct Plan - Growth (link) : Launched in Feb this year. No Crisil rating.

I'm looking to invest in only one fund with an SIP of around 10-12k per month over the next 3 years at least.

Could the experts here advise which one to go for from the above?

[DigitalOne]

Originally Posted by skumare

While the returns are not bad for a small cap fund, it is rated 3 stars by Valueresearch, want to understand how these ratings are arrived at?

In the small cap category, I see only one fund having 5 star rating (only Axis Small cap) and 4 funds having a 4 star ratings. It is probably a good idea to compare these 5 funds on the risk parameters to Quant Small cap fund. I am too lazy to do it .

ps - I had not invested in any of the funds of Quant AMC earlier. But recently went against my general tendency to invest a small amount in the Quant Momentum NFO, fully aware of the higher risks in momentum strategies.

[Small Bot]

Originally Posted by n_aditya

.
I'm looking to invest in only one fund with an SIP of around 10-12k per month over the next 3 years at least.

Could the experts here advise which one to go for from the above?

I'm not a fan of SIPs in any sectoral / thematic fund. I don't think it's worthwhile investing systematically, they might be more suited for aggressive and experienced investors who do a lot of research before investing in spurts.

If I had to put all my equity money in just one single fund, I'd rather choose an SIP in a Nifty 50 or Sensex Index fund and forget about it for a few years.

But if you point a gun at me and make me choose only between the funds you've listed, I'd prefer the Large and Midcap fund.

I don't feel like the extra risks borne by the other funds are commensurate with the extra gains you might get.

[vijaykr]

With so many questions (recently) asking about investing into small-cap, mid-cap and thematic/sectoral funds and also the market continuing to scale new-highs I thought to take a look at MF inflows info available on the AMFI website.

The data for the month of Nov'2023 was pretty interesting to say the least. Small-cap funds alone received net inflows close to 3700 crores close to 24% of total inflow into equity-oriented MF schemes. Next highest inflows were into mid-cap funds of over 2600 crores for around 17% of total. Third highest inflows of 1960 crores (13%) was into thematic/sector-specific funds. Large-cap funds only received net inflows of slightly over 300 crores - a measly 2% of total.

Most categories of debt-funds had net outflows only for November month.

I took a quick look at October month net inflows and there too small-caps received the max inflow during month of close to 4500 crores followed by sectoral/thematic funds with close to 3900 crores. Inflow into mid-caps was in 4th place with 2400 crores.

Given that the universe of small-caps is pretty small and valuations are crazy-high currently already, I wonder how the fund-managers will deploy these huge inflows into this category. Similar thought on the current high mid-cap inflows though they might have a slightly larger pool of companies to invest into.

Falls from highs for small and mid-cap stocks and in turn MFs invested into these in a market pullback situation could become significant. I guess I need to rethink about how much money to invest into these categories now. Any FOMO-based actions I take may end up giving me headaches I can do without

Appreciate your thoughts and feedback.

[N.A.GTC]

Originally Posted by vijaykr

Any FOMO-based actions I take may end up giving me headaches I can do without

I think this just sums up the fundamental thing to keep in mind while investing today. I have seen way too many friends/colleagues hop-on the "trading" craze with stocks as well as crypto, driven simply by FOMO.

[.sushilkumar]

Originally Posted by Small Bot

I'm not a fan of SIPs in any sectoral / thematic fund. .

+ 1. The biggest draw back with majority of thematic funds are that they are seasonal & like living in a "well" when you have whole ocean to swim and explore. Moreover, they gets influenced by external factors or govt decisions a lot. example being infra related funds.

[raksrules]

Originally Posted by vijaykr

Most categories of debt-funds had net outflows only for November month.

Since debt funds lost the indexation benefit and gains are added to income and taxed as per slab rate, people may be apprehensive investing in those. They may prefer other debt instruments like PPF etc.

[Small Bot]

Originally Posted by vijaykr

Given that the universe of small-caps is pretty small and valuations are crazy-high currently already, I wonder how the fund-managers will deploy these huge inflows into this category. Similar thought on the current high mid-cap inflows though they might have a slightly larger pool of companies to invest into.

Falls from highs for small and mid-cap stocks and in turn MFs invested into these in a market pullback situation could become significant.

That is my concern too. The returns from small- and mid-cap funds might be eye-watering when the stock market goes up, but anyone who invests in those solely based on past returns is horribly misguided. I see returns-chasing people investing in those and calling it diversification, and I just shake my head. I also read advice from Insta experts who say that investing for a longer duration can reduce the risk in mid- and small-cap funds, but I seriously don't believe that's always the case, is it?

I honestly feel that large-cap funds are overall more value long-term for the risks taken, so the major portion of any equity portfolio should ideally be in the top 50 or 100 companies on the Nifty list. Those fund managers can handle additional AUM better than the mid- and espcially small-cap fund managers.

Originally Posted by raksrules

Since debt funds lost the indexation benefit and gains are added to income and taxed as per slab rate, people may be apprehensive investing in those. They may prefer other debt instruments like PPF etc.

I don't think it might just be moving to other debt instruments. Several good instruments like PPF have upper limits. I'm pretty confident that a large portion of the equity inflows that @vijaykr highlighted might have come from people just withdrawing their debt portfolio money and putting it in risky equity sectors for better returns.

All I wish is that such investors are doing so with full knowledge of the potential consequences. If so, then it's good. If not, then we seriously need more people to consult proper financial advisors.

[thirugata]

Originally Posted by Small Bot

investing for a longer duration can reduce the risk in mid- and small-cap funds, but I seriously don't believe that's always the case, is it?

I honestly feel that large-cap funds are overall more value long-term for the risks taken, so the major portion of any equity portfolio should ideally be in the top 50 or 100 companies on the Nifty list.

Nifty, Nifty Jr, Nifty midcap 100 and Nifty smallcap 100 indices have started at different times. Nifty smallcap 100, last of them came into existance from 2004.

So 1 Rs invested in all the above 4 indices on Jan1 2004 would have become as follows as on Dec 31st 2022.

Nifty - 9.09
Nifty Jr - 11.81
Midcap 100 - 12.42
Smallcap 100 - 8.65.

(I do this calculation on 31st Dec every year, so data for 2023 is not available as of now).

Now as you can see, there is not much of a difference between what is considered to be the cream (Nifty) and what is considered to be the least quality ( Smallcap).
NiftyJr and Midcap 100 have nothing much to differentiate between them and outperformed Nifty.

Adding some more data for this period :

Nifty had 3 -ve years, max gain in a year - 74.71% (2009), max loss - 51.9% (2008), No of years with double digit returns- 12
Nifty Jr had 4 -ve years, max gain - 127% (2009), max loss - 63.7% (2008), No of years with double digit returns- 11
Midcap 100 had 5 -ve years, max gain - 98.4% (2009), Max loss - 59.4% (2008), No of years with double digit returns- 11
Smallcap 100 had 6 - ve years, max gain - 103.2% (2009), Max loss - 71.4% (2008), No of years with double digit returns- 11

I am not concluding anything here, leaving the data for everyone to analyze and come to their own conclusions. Hope it helps in bursting some myths in the market.

[wocanak]

Originally Posted by thirugata

Nifty, Nifty Jr, Nifty midcap 100 and Nifty smallcap 100 indices have started at different times. Nifty smallcap 100, last of them came into existance from 2004.

So 1 Rs invested in all the above 4 indices on Jan1 2004 would have become as follows as on Dec 31st 2022.

First, the return calculation should be based on the total return index (TRI) and not just the normally quoted index values to take into account the dividends. For the NSE indices you can get the historic normal and TRI values from the NSE website.

Second, everything follows a cycle of ups and downs, and different indices may have differing cycles. So you don't want to just measure returns between fixed dates, you need to do rolling returns to average out the cyclical variation. For equity it could be 5 year or 10 year rolling returns from 2004 to till date.

Only then the return comparison will be correct. I currently don't have the time to do that, instead below is a quick comparison of 5 year rolling returns for last 10 years of NIFTY 50 Index, SBI Small cap fund and Equity Small cap category from MF online. Standard disclaimers: no opinion expressed, it just past return data and of course past performance is not indicative of future performance.

[carboy]

Asking a question for a non-tech savvy person of age nearing 60 - if the AMC (HDFC or ICICI MF AMCs) is contacted will their representative come home to fill forms & set up SIP for an Index fund (Direct) - the amount will be substantial.

[Small Bot]

Originally Posted by thirugata

So 1 Rs invested in all the above 4 indices on Jan1 2004 would have become as follows as on Dec 31st 2022.

Nifty - 9.09
Nifty Jr - 11.81
Midcap 100 - 12.42
Smallcap 100 - 8.65.

Now as you can see, there is not much of a difference between what is considered to be the cream (Nifty) and what is considered to be the least quality ( Smallcap).
NiftyJr and Midcap 100 have nothing much to differentiate between them and outperformed Nifty.

Originally Posted by wocanak

First, the return calculation should be based on the total return index (TRI) and not just the normally quoted index values to take into account the dividends. For the NSE indices you can get the historic normal and TRI values from the NSE website.

Second, everything follows a cycle of ups and downs, and different indices may have differing cycles. So you don't want to just measure returns between fixed dates, you need to do rolling returns to average out the cyclical variation. For equity it could be 5 year or 10 year rolling returns from 2004 to till date.

Thanks for sharing this, gentlemen.

To my layman eyes, all I can see is:

• Small Cap index generally hasn't beaten Mid Cap index.
• There is also a lot more oscillation (for want of a better word) in Small Cap index as compared to Large Cap index.
• Large Cap index generally has the least drawdown in cases of market crash.

Isn't that enough of a difference, and enough of a deterrent, from having too much exposure to Small Cap funds, and probably a sign to increase more exposure to predominantly Large Cap and to a lesser extent Mid Cap funds?

[fhdowntheline]

Originally Posted by carboy

Asking a question for a non-tech savvy person of age nearing 60 - if the AMC (HDFC or ICICI MF AMCs) is contacted will their representative come home to fill forms & set up SIP for an Index fund (Direct) - the amount will be substantial.

Nowadays they do it, but better go to their branch office since its your precious money accumulated.