Jagoinvestor

September 23, 2013

3 parameters to look at before you pick your mutual fund house !

There are more than 40 mutual fund houses (AMC) in India and every investor has his own favorite mutual fund house to pick. We hear about best mutual funds on various websites, hoardings and even look at their performance on valueresearchonline and then choose them for lumpsum investment or starting our SIP.

But on what parameters do you choose these mutual fund houses (not mutual fund) ? Will you pick Birla Sunlife or DSP BlackRock ? Will you choose HDFC or SBI mutual funds? Will you pick Quantum Mutual funds or PPFAS ? Or will it be Reliance Mutual Funds or ICICI Prudential ?

how to choose mutual fund-house

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In this article I want to talk about 4 parameters which were discussed by a Financial Planner – Dinesh JainΒ in one of the articles comments section. I am expanding them for the benefit of readers.

3 questions to ask before choosing a great fund house

1. Is asset management the core competency and passion for fund house or just another business ?

One of the things, you can look at is – “Is Asset management just another business for the fund house to make money ?”, Or is it also their passion and core competency? Will they close down the business or sell it to some other AMC, just because the revenues are down ? What kind of message do you get when you look at the fund house advertisements or their videos on internet? Take an example of Birla Sunlife mutual funds and Quantum mutual funds, do you see any difference in the way they operate or communicate ? Which fund house do you feel is more focused on asset management ? Or look at DSP BlackRock Mutual fund and Reliance mutual fund , do you get a different kind of feel in both or same ?

The first level filtering of this parameters will clean out some fund houses from your mutual fund shopping list. Note that its up-to you to decide which fund houses you think do not pass this test. You have to do your own study on this.

2. Does Fund house focus on Quality or Quantity of funds ?

The second important parameter to look at how many funds an AMC launches and for what reasons? Now, I am not saying that the fund house should not launch new funds, but do they do it, because of the demand and opportunities in market or just to cash on the market sentiments and mood ?

There are so many fund houses, who came up with new and useless NFO’s during stock market boom, just to cash on the market sentiments and named their funds in such a fancy manner that gives a feeling that the fund is so awesome ! , but when the market was bad, and they could not handle so many funds, they merged them with their other better performing funds.

So some fund houses are really an ASSET MANAGEMENT COMPANY and some are kind of ASSET GATHERING COMPANIES which just want to launch funds and their focus is on increasing the AUM, so more charges can come to them and increase their profitability. Nothing wrong in making more profits or thinking about it, but at what cost is it done is the question? Now its up to you to decide if you want to avoid these kind of fund houses or go with them.

3. How transparent and Honest is Fund House

One of the parameters you can look at is the transparency and honesty of the fund house. Look at their website, and see what kind of disclosures they have made? Do they do what they say ! , or both are different things ? Do they do their investor education program just to sell their products and schemes or genuinely they want to help investors ?

Conclusion

Picking a right mutual fund is important, but you should also do some background check on the parent fund house also before you pick your funds. Note that these 4 parameters are just for reference and it might happen that for someone these parameters does not make sense.

Can you please share what parameter you think is important one !

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127 Comments
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spguptahyd
spguptahyd
7 years ago

I saw Quantum longterm Large cap fund. its performs seems to be good. But the form and its unusual conditions etc
scares me. Why unusual caution? Can I safely apply and SIP in this long term fund? Full one page declaration to be signed is very unusual and gives an apprehension that whether such long declaration is sought -what for?
Please advise

gupta
gupta
Reply to  Jagoinvestor
7 years ago

Thanks

Sujay
Sujay
8 years ago

Hi,
I prefer to look after two more parameters.
1. How often the company gives NFOs, and how unique those are. In other angle, how many funds the AMC manages, and how different those funds are those objective-wise.
2. How well they distribute their funds among the fund managers. E.g. Look at DHFL, and how many funds does Akash Singhania (43), Rakesh Puri (31) manage at once. Such workloads are bound to affect the funds performance.

Lastly, I must say that I would personally give your first point lesser importance. Just only because the mutual fund business is a part of the companies business portforlio, doesn’t ensure that the company will put lesser importance in it in times of disaster. In contrast, companies with broader business portfolio may effectively manage those disastrous period. But all these obviously narrows down to “their passion and core competency”.

Rajk
Rajk
8 years ago

I am investing in Quantum tax savings fund for 2yrs through SIP. Shall I continue investing in this fund? Thanks

Hussain
Hussain
8 years ago

Hi , I am investing in TATA Equity P/E Fund @ 2000/- per month through SIP, roughly what will be % return if i stay invested for 3-4 years

aadesh
aadesh
8 years ago

Hi ..I am beginner and want to invest in mutual fund for short and long term both.
Pls suggest me best option for me ..which fund I should consider ..for 5k for each

ganesh123
ganesh123
8 years ago

Hi Manish…
I am 28 year old and just started investing and planning of my future financial life…. I am a service person and earns 20 k per month…
I am investing in equity in small quantity in which I prefer is Intraday for making some quick bugs…. and I am taking home 1-2 K per day in intra day…
But I Know its little risky… Now I have decided to start investing in SIP mutual funds which is better for me? I can invest upto Rs 2000 per month at this initial stage…
Can u please suggest?

ganesh123
ganesh123
Reply to  ganesh123
8 years ago

Or I also prefer in equity mutual fund…

Mahesh
Mahesh
8 years ago

Hi Manish,

I am regular reader of your article.
I am layman in Mutual fund investment.
After reading you blogs i start investing in SIP.
My portfolio is :

SBI Blue Chip Fund G 4K
Reliance Small Cap F 4K
BSL MNC Fund G 3K
FRANKLIN INDIA OPPOR (G) 4k

Please advise about funds i invested.

Keep it up buddy πŸ™‚

Mahesh
Mahesh
Reply to  Mahesh
8 years ago

I am aged 35 and monthly take home is 1L 10K.
Want to invest for my daughters education after 10 years.

Karthikeyan
Karthikeyan
8 years ago

Dear Mr.Manish,
First I would like to appreciate you for this great job of sharing your expertise.
I am a professor aged 47 years. I would like to invest 30,000/- to 40,000/- per month for next 11 years. I request you to kindly suggest me, how I can go about it?
Thanks and regards,
Karthikeyan.M

Mohit
Mohit
8 years ago

Hi, I have the following SIPs and wish to aggressively invest over next 3 years after which I expect my high income to stop. But I will hold on to these investments for a good 12-15 years. Please suggest if chosen funds are okay –

SBI Bluechip Fund – 40k
HDFC Midcap Opportunities – 30k
UTI MNC Fund – 30k
HDFC Infrastructure Fund – 15k
Reliance Nifty Index Fund – 15k
UTI Equity Fund – 30k

I have total portfolio size of about 2 cr now along with above SIPs over next 3 years.

My question is –

1) would the portfolio look at about 10cr in say next 12-15 years when I will start to withdraw and fund my income from it?

2) I can invest about 50k more each month. Which funds are recommended pls

JAYESH
JAYESH
8 years ago

I want to invest monthly 3000 rs in SIP mutual funds (growth) for 2-3 years. Which is now best mutual fund to invest .

KrishnaChaitanya
KrishnaChaitanya
8 years ago

Hi Manish,

I need your suggestion .
My mother will be retiring in next 6 years.After 6 years to get her a decent amount apart from her savings and PF amount I have invested in two mutual funds in SIP mode.
1.Franklin India Prima Plus – Rs 3000
2.Birla SL top 100 -Rs 3000
Is my selection good choosing these two funds for a span of 6 years?
I am assuming a amount of 8-10 lacs with 12 % returns after 6 years.

Tarun
Tarun
Reply to  KrishnaChaitanya
8 years ago

Hi Manish Sir,
Really appreciate your work.
I am a medical student from a decent background.
I have 2 queries!
1. I want to invest 3k as a high return high risk funds SIP, i narrowed it to few choices after reading many articles online, could yu please suggest the best one as am an amateur at this.
– Canara Robeco Emerging equities fund
– BNP Paribas mid cap fund
– Mirae asset emerging bluechip equity fund
– UTI Mid cap fund
– IDFC premier growth fund.

2. I have a family broker who comes and dies all the work for us, how do i know if hes taking any amount from us as he doesnt take any money from me for any investment directly.
So is purchasing these funds online a better way?

Nitin
Nitin
8 years ago

Hi Manish,

I have invested in below MF (SIP) via fundslindia from past 3 years:

1. Franklin India Blue-chip fund (Growth)
2. HDFC Equity fund (Growth)
3. SBI Emerging Business Fund-Reg (Growth)

Gross Return for 3 year is around 27.95%. Though not sure about annual return (still calculating).

My questions are:
1. Is the selection of funds are good in terms of long term investment or should I replace these funds with some other better options. (Confused here)

2. I would like to increase monthly invested amount, should I put in some fund or should I invest in another better funds.

Actually, I wanted to know whether any other combination of MF (apart from one which I have chosen) would be a good pick in term of more returns in a future since it is for long term investment and if you pick less performing MF then return would be less in future.

Eagerly waiting for your reply.

Thanks!

Nitin
Nitin
Reply to  Nitin
8 years ago

Hi Manish,

Seeking for your suggestions on my above query?

Thanks!

Nitin
Nitin
Reply to  Jagoinvestor
8 years ago

Thanks Manish,

One more question, I want to increase my SIP amount by 10000 monthly. I got a suggestion from my friend/agent to invest in some new funds instead of investing in existing fund in order to make more diversified portfolio. Below are the funds suggested:

1. Franklin India High Growth Cos Fund(G)
2. Franklin Build India Fund(G)
3. HDFC Balanced Fund(G)

As my understanding, that we should not invest in more than 2-3 funds,
1) So is it advisable to invest in above new funds or investing in existing fund should be good for my portfolio?

2) How is above suggested funds? Is it good to invest on them?

Please advice!

Thanks,
Nitin

Nitin
Nitin
Reply to  Nitin
8 years ago

Hi Manish,

It would be great if you can share your views on my above query?

Thanks!

Dev
Dev
8 years ago

Hi Manish,

I am investing for the first time in MF. I am 26 years old and want to invest lump sum amount in MFs. I can invest up to 6 lacs but confused which MFs I should invest in. After consulting my ICICI bank they suggested few ICICI prudential funds. I was still not sure as they did not suggest me any other plans apart from those which comes under ICICI prudential family.

Can you please suggest in what MFs and what amount in each should I be investing. I was planning to invest in all three categories i.e. Large cap, Diversified and Mid Cap funds to make sure all eggs are not in one basket.

What about ICICI prudential value discovery fund, ICICI prudential Blue chip fund? please suggest good options in each category.

Eagerly waiting for reply.

thanks,
Dev

angelo
angelo
Reply to  Jagoinvestor
8 years ago

i would like to invest 3000 monthly kindly advise or mail to [email protected]

Pugulu
Pugulu
8 years ago

Hi Manish,

My age is 28 and monthly income is 50k.
I am new to MF investing and planning to buy two plans;
A Short term- return oriented-medium risk plan and a Growth- Decent returns-Less riskier plan

After some research I have finalized on two plans;
1. Axis Long term equity- Direct
2. Tata Balanced Funds
I can invest upto 2-3k in each of the above plans in SIP.

Are the above two good plans or you have anything better in mind?
Since I am a novice, should I go for an advisor or buying directly AMCs would be okay?

Thanks & regards,
Pugulu

Milan
Milan
8 years ago

Hi Manish,
I have invested 50000 annual lumpsum in Kotak classic opportunities fund. Can you pls advise how it would perform in long term ?

raje
raje
8 years ago

Hello..

I have around 4 lacs and I am planning to have them invested lumpsum and locked in for 5 yrs or above and hence interested to park it in MF.

Please suggest what is a better fund to have purchased? Is HDFC\Birla Equity fund good? or invest in debt funds?
Please advice.. Thanks..

Raje
Raje
Reply to  Jagoinvestor
8 years ago

Thanks.. It would be great if you can please advice on which would be a better fund we can invest on ?

Paresh
Paresh
8 years ago

Sir,

Want some guidance from you, I just started mutual fund investment by monthly SIP of Rs.1000/- in SBI Blue Chip Fund DIRECT (G) for 20 yrs.. Now I want to invest in some other funds for next 10 to 20 years please guide me about my choice and suggest if any changes required.

HDFC Balanced Fund Direct (G) : 1000/- per month
HDFC Top 200 Fund Direct (G) : 1000/- per month
Tata Balanced Fund Direct (G) : 1500/- per month
Tata Ethical Fund Direct (G) : 1500/- per month
SBI Magnum Mid Cap Fund Direct (G) : 1000/- per month
SBI Magnum Global Fund Direct (G) : 1000/- per month
ICICI Prudential Value Discovery Fund Direct (G) : 1000/- per month
SBI Magnum Balanced Fund Direct (G) : 500/- per month

Waiting for your reply, Thanks

Paresh
Paresh
Reply to  Paresh
8 years ago

Dear Manish Sir,

Waiting for your reply…..

Thanks

Paresh
Paresh
Reply to  Paresh
8 years ago

Manish Sir,

Still waiting for your reply……………….

Paresh
Paresh
Reply to  Jagoinvestor
8 years ago

Thanks……….!

Anilloka
Anilloka
8 years ago

Hi Manish,

I have 2 queries

1. Selecting 4-5 mutual funds from same category is good practice or Different categories? I mean Do i need to select all 4 Mutual funds from Large Cap Equity Mutual Funds or Diversified Equity Mutual Funds or Hybrid( Balanced) Equity Funds? Can i pick 2 from Diversified or 2 from Balanced? I have done some research,from the last 5 yrs Diversified and Balanced funds are doing better than large cap funds. I’m ready bare some risk,

2. Planning to SIP 3-4K every month? for this amount can i get tax exemption under 80C for the coming financial year? Or Only tax saving funds only eligible under 80C?

Please suggest!

Anilloka
Anilloka
Reply to  Anilloka
8 years ago

3. Also Selecting Mutual funds from same sector is good ? or Different sector?
Like Selecting all from banking or 2 are from banking or 2 are from Different sector?
Example 2 from HDFC/ICICI and 2 from franklin inida or Birla Sunlife?

Murali
Murali
8 years ago

Hi Manish,

I’m 28, can spare 10K per month due to my nature of job I am not able to monitor my funds closely (can try to monitor once per 2 months max)

I have PPF and depositing as per the limit

So Could you Kindly suggest some good Mutual funds for my retirement?

Prashant
Prashant
8 years ago

Hi Manish,

I am a father of a 1 month boy and want to plan for his education from now itself, m planning to invest 2 to 3k every month for 18 years period. could you please suggest a good SIP plan for me.