How to judge whether a fund is good or bad?

POSTED BY Ramesh ON December 15, 2010 3:40 pm COMMENTS (6)

It is a very common query, which is the best ELSS / best midcap / best large cap / best equity / best debt fund.

We all know there are a large number of factors including luck which are behind the returns generated by a fund. So what do you think should be the criteria by which one should evaluate them. There is a large body of data available on valueresearchonline, morningstar, moneycontrol, etc.

Or should we just follow the best fund recommendations!

6 replies on this article “How to judge whether a fund is good or bad?”

  1. Jagadees says:

    @Atul
    I would like to make a small point. Actually ICICI prudential dynamic and discovery fund were run by Mr.Sankaren naren since 2006 and not nilesh shah…. He is one among of the finest mind in the industry with good track record.

    Regards
    Jagadees

  2. In general High rated funds can be used to make a list of funds where you might want to invest and from that list further choose funds for yourself . I would use different time frame returns and how consistent the fund has been in providing the returns ! .

    Also you can see some things as mentioned by Atul like low charges , low turnover ratio etc etc

    Manish

  3. Atul says:

    Hi Ramesh,

    I have only 4 MFs in my portfolio and all are from HDFC/DSP bucket.

    Templeton India Growth is good fund, will plan for future investment.

    ICICI Prudential Discovery fund is fine. Except now since Nilesh Shah is leaving ICICI prudential I will be bit concerned since he is one of the best in MF Industry.

    Regards

    Atul

  4. Ramesh says:

    @Atul

    Very well said and described.

    I would also include Fidelity and Templeton AMCs. Reliance is also not bad. 🙂
    Otherwise, cannot improve upon your analysis.

    Also, on the above mentioned points, what are your recommendations?

    Mine are:
    Fidelity Equity, Tax advantage
    Templeton India growth, equity income, Franklin blue chip / Prima Plus
    ICICI dynamic / discovery
    HDFC Equity
    Reliance Growth / RSF.

    Thanks
    Ramesh

  5. Atul says:

    Hi Ramesh,
    Past record of MF returns should never be used for predicting the future returns. First thing you should do is identify your investment horizon, risk capacity, equity/debt exposure and sector preference.

    1. Look out for Mature MF parent. I would prefer HDFC, DSP, ICICI Prudential.
    2. Look for past investment history and returns.
    3. Look for the MF manager. Some of them Industry admires are Prashant Jain,Nilesh Shah .
    4. Choose MF with lower expense charges
    5. Avoid MF with large corpus. Though it is advantageous for MF to have large corpus for investing in euqity/debt, the opportunities are less and thus MF may sit on cash and hence lower returns
    6. Avoid MF with high turnover.

    Hope this helps.

    Regards

    Atul

    1. amol82 says:

      can you please elaborate further on point no.5 ?

      HDFC Top 200 has very big corpus and still its one of the best equity fund in today’s date with moderately good return ?
      in that case do you mean we should avoid investing in such fund ?

      thanks in advance

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