MF Advice

POSTED BY Ankur ON April 5, 2012 12:10 am COMMENTS (21)

Hi Experts,

Am already doing a SIP of 5000 pm in-
-HDFC Equity
-IDFC Premier Equity
I want to additionally add one more MF to my portfolio. the fund that i have shortlisted is UTI Dividend yield. Please comment if it is good move to add it to my portfolio or should i add some other MF.
My planning is for long term(10+ yrs) and can take above average risk for my profile.

Thanks in advance!!

21 replies on this article “MF Advice”

  1. Dear Raj, keep asking questions to make the thread active. Without questions, how can we keep the thread active on our own?



  2. Raj says:

    This is definitely the best thread on MF advice on this forum. I keep coming back to this page when I am in doubt. Thank you Jagadees and Ramesh. Since we get lot of questions on MF advice please make this thread sticky.

  3. Ramprakash says:

    Everyone suggests to diversify Equity MF investments by mode of SIP and category (Large, Mid, Multi, Balanced & ELSS). Should One also diversify AMCs?

    For eg.

    Large & Mid Cap: HDFC Top 200

    Multi Cap: HDFC Equity

    Balanced: HDFC Prudence

    ELSS: HDFC Tax Saver

    All the above are good funds. But belong to the same AMC.

    So should one choose the following by replacing one set of good MFs by other set of good MFs to diversify AMCs?

    Large & Mid Cap: Franklin India Bluechip

    Multi Cap: Quantum Long Term Equity

    Balanced: HDFC Prudence

    ELSS: Canara Robeco Equity Tax Saver

    1. Dear Ram Prakash, theoretical answer is yes & practical answer is no. As long as you are investing only in a single AMC & are quite happy with the over all performance of the AMC, no reason to worry. Yes if the performance slips significantly, you have every reason to worry & all of us are aware that no body can predict this slip in performance & by the time, you have noticed, a great amount of your wealth may have already eroded or destroyed.

      At the end, it’s a personal call.



  4. Ankur says:


    Thx for ur reply. Was a perfect insight for selection of AMC. I will revaluate other AMC’s now and then decide for SIP in new MF over next couple of days.




    Well said. I am agreeing ur point of seeing the Fund house track record.

    Above all we cant control some things

    But the problem lies here.

    Do we know fidelity will go out of india before 3 years/ 5 years?

    Future is always a big question mark!

    This makes me think sometimes ” is it possible to get the expected returns with our hard earned money in the long term”

    1. Ramesh says:

      So, you need to modulate things and adapt your portfolio accordingly.
      If fidelity goes out, still you have many here which are equivalent. There is always a choice / fallback.

      Unless, you are severely locked-in like in Investment-Insurance combos (read Ulips and traditional plans, etc).

      1. Jagadees says:

        Thanks Ramesh
        This thought bothered me a lot for some months. Because once u selected a fund to invest, it will take atleast 3 years to reverse the decision. For example, We will notice the underperfomance after one year, may stop SIP by second year end if underperformance continues and may redeem only at the end of 3rd year when its bad run continues abated. In the meanwhile we would lose 3 years of compounding advantage to our final corpus.

        Yes, nobody cant predict future. But in the case of fidelity, they did not underperform the category in the past one year due to the stake sale buzz. It was business as usual. Now SEBI will give one month window to redeem funds without attracting any penalty and hence one can switch to other fund if they want. No question of discontinuity. (But tax scheme cant be redeemed and investors are struck with new mgmt).

        what u say?

        1. Ramesh says:

          @ Jagadees

          I am attaching links to 2 pdf’s about some of the thoughts about the current options. Please go through them as and when possible, and convey your thoughts. Thanks.

          Other views are also welcome.



          1. Jagadees says:

            Good write-up with crisp points. My thoughts:
            1. Templeton India equity income – I like both its fund manager Mark Mobius (John Templeton disciple) is truly an indiana jones of investment industry and its unique mandate to invest upto 35% in emerging markets.
            2. Quantum long term equity – My personnel favorite. According to me this combination of Process based-Value based investing + Low churning of portfolio + Low expense ratio never fails/disappoints. Would you believe this?? Only 57 stocks have so far appeared in the portfolio of fund’s entire life and just 6 of them have remained for five months or less. Truly amazing.
            3. Personally i dont track any of the reliance fund (quite averse to ADAG group)
            4. IDFC premier equity – one can boldly say Kenneth Andrade as midcap specialist – follows value-based contrarian approach. Quite disciplined too. Even though the fund is largely into midcaps, One amazing thing i noticed is in 2011 it contained its downfall to 18% when compared to sensex returns of -25%. Yeah as u mentioned it allows new investors into the fund only when he senses an opportunity which is a good thing.

            5. DSP equity: Good AMC and good fund for core portfolio as u mentioned. But personally i dont like fund manager style due to high churning, but investors in general no need to worry as long as fund delivers with good process to get-in and out of a stock.
            6. HDFC equity: Good AMC but quite disappointed with front-running charges and all. Quite apprehensive regarding huge corpus. Hence i would go with HDFC prudence if one want prashant jain’s style of management. other funds from the stable like HDFC midcap/HDFC balanced/HDFC growth also delivering consistent returns.
            7. Franklin funds: Kind of Dravid-esque type of amc – very dependable and consistent still under appreciated among public. One amazing thing i noticed, it never raises too much cash and also tries to be 95-100% invested but still its downside protection capability is quite amazing. Recently forbes india carried a nice article on the fund house –
            8. Yeah very disappointed with fidelity exit along with its fund managers. big loss to indian investors.

            Looking forward to your comments.
            Really poor knowledge on debt side – so no comments.

            1. Ramesh says:

              Thanks a lot for these wonderful analyses. Thanks for the very informative link.

              Regarding 1 and 2, I have got no doubts at all. And actually, both of them complement each other in a strategic sense within a portfolio. The conviction of the fund managers and AMCs is also very good.

              Regarding Reliance RSF -equity, I understand the nature of their reputation. However, the fund manager and the AMC have been able to remain true to their style, despite the nowhere-going-broad-market. This thing is commendable. Combined with a relative low turnover, low FMC and consistent management team (no major people have left, as far as I know), this fund does not deserve an exit. Hence, I have categorised this fund to be kept as an aggressive part of the portfolio, and it should give good returns. Retaining a reasonably good team is also a great thing (my issue with ICICI AMC team, in this respect).

              The biggest part of my new analysis is the DSP-BR team. I have always shunned their frequent churning as a big no-no from my side. However, after analysis, I have found that their turnover is actually lower for mid and small caps (according to them, these stocks require time to realise their value), while the large cap churning is much more (since according to them, the large caps usually trade near to their true value). The style of the management team has remained consistent across market trends. Also, the FMC has remained low despite the frequent churning.

              Franklin funds have proved to be the best in my humble opinion. Their management team has a great track record, in terms of succession plan (which is very important, if you want to keep money in for a long term). Very few AMC have that record or intent. Fidelity have been similar, but their exit is a big blow, as you rightly pointed out. Though, their International Opportunities fund is nearly similar in style and intent as Templeton India Equity Income (but without the Indiana Jones!).

              Regarding debt funds, since I believe in the management of Franklin Templeton, and their debt funds have performed reasonably (though, the charges are a bit on the higher side, still they make sense).

              A little note about HDFC Prudence. I am not very impressed by this fund (despite their great returns). The portfolio has remained a bit inconsistent, in terms of exposure to different market-caps at different times. I agree with Subra, that this fund is more like an equity fund and not a balanced fund, and it is better to consider it that way as part of your portfolio.


          2. Dear Jagadees, I thank you for putting so much efforts to write such a nice piece of info.



          3. Jagadees says:

            Bias on the positive and negative extreme is always dangerous and I try to contain as much as possible but in vain. Yeah I agree top management at Reliance AMC were quite stable and in fact both Sunil Singhania and Madhu Kela are still sticking with the group which says AMC is doing something good. Would like to more about the fund.

            When u mentioned RSF does it mean Reliance Regular Savings equity? It looks downside protection of the fund is very limited. Because in 2011 it lost 30% when compared to sensex return of -25% and even in 2008 the fund fell along the same line as sensex. Because my personal belief is that if u take care of downside, upside will be taken care automatically. Turnover is also around 100%!!

            Absolutely spot on regarding ICICI AMC. Also after reading this article I lost all my respect on the organization – Although the article is about Birla money, it throws more light on ICICI too.

            Apoorva shah and S Nagnath built a quite robust AMC. One more thing to notice is that they never launched any sectoral/infra funds when it is in vogue and their equity offerings are quite compact. Mainly because of the team I maintained that investors no need to worry about high turnover ratio when the fund team has robust process driven steps to get-in and out of the stocks and deliver good returns.

            I have a doubt – will Fidelity International Opportunities fund will be completely managed by Fidelity team from Hongkong or they will maintain only international portfolio and will leave indian market to local L&T team??

            Yeah I agree HDFC prudence sports large cap/multi-cap portfolio according to the jain’s perception about the market. But I chose to invest because fund will have only 4500 crores of equity portfolio to manage (which I am comfortable with than 10k crores) and in-built periodic rebalancing.


            1. Ramesh says:

              Reliance RSF indeed mean Regular Savings Equity (not the other two). Yes, I had categorised it as an aggressive part of portfolio, since it does not have the downside protection of the Dravidian funds (=Franklin funds, except TIEI). It is more like Sehwag (poor current form, but good potential). Regarding turnover, it seems that you have got that data from Morningstar (which gives it 101% something). The thing is that VRO shows it to be around 33% (and I consider VRO data, mind you not ratings, to be better than morningstar). Another case in point, check turnover and FMC of Quantum Long Term Equity -MS shows 45% and 1.6%, while VRO shows 1.8% and 1.25% = the latter should be the correct values, since the documented FMC of QLTE is indeed 1.25%.

              So, maybe you can revisit the data of RRSF-equity option. The positive thing about this fund as compared to IDFC Premier Equity is the better managed fund house. Since, beyond K.Andrade, I am not very confident about this AMC. And I think, in real good bull phases, these two funds should outperform every one else.

              Fidelity’s International Opportunities fund could have been a good choice. But, as you mentioned without proper details, putting money there is not a good idea.

              HDFC Prudence has a much larger corpus (around 6600- again VRO data is correct and not MS, confirmed by AMFI data of recent quarter which shows 2934 cr in dividend option and 3314 cr in growth option). But, since there is an option to invest in debt, the equity portion is around 60-70%, which is okay. It is just that, because of its size and market-cap, I tend to keep it in the aggressive side of portfolio (I do have some money in it).

              I have lost faith in both ICICI and BSL AMC. I feel for S Naren, who has to now manage things at ICICI, and from what I see in news, he is feeling things are a bit tough. Taking control of few funds again (ICICI dynamic) means the next-in-line managers do not have the full confidence. And, leaving the reigns of ICICI Discovery has also created confusion in my mind.
              (Actually, the same thing happened in case of Franklin Prima Plus fund. This fund was managed by S Rajah for around 14-15 years, if I am not wrong, and then when it changed hands and was started to be managed by Anand Radhakrishnan, I was a little skeptical. But fortunately, the succession has proved to be very good and I am happy about it). This just reiterates my faith in Franklin funds.

              Again, I am very thankful for your insightful comments and the link (I had lost that link from my bookmarks).


  6. Jagadees says:

    I think investors are generally missing one crucial step in selecting a MF for long term portfolio. Following are my steps.
    1.Shortlist AMC’s with good investment process and long term record in managing people’s money
    2.Within the selected AMC, look for good performing MF’s with solid long term performance
    3.Then look for expense ratio, risk/return grade etc.
    (Between why does corpus value matters in selecting the fund??)

    Generally investors work out step 2 & 3 but miss step 1 which is crucial in my opinion. AMC with good investment process acts like a solid foundation for a building. It helps to groom juniors & maintain continuity in case its so-called star fund manager leaves the firm.

    This thought process came out by looking at the performance of SBI mutual fund over the years. Everyone knows that by 2006-2007, its magnum tax gain and magnum contra are investor’s top favorites due to its spectacular performance in preceding 3 years. But when its star fund managers Sandip Sabharwal and N. Sethuram Iyer left the firm, wheels came off and funds of SBI MF dropped to bottom quartile & never recovered. In my opinion, it is due to lack of solid investment process & lack of continuity at top management level in the AMC and being PSU does not helps its case to attract good talents.

    Similarly UTI after years of underperformance, turnaround from 2005-06, thanks to its dynamic CEO sinha who brought in some good talents like fund managers swati kulkarni & Anoop bhaskar . But ever since he left for SEBI in 2011, the firm is without its CEO for past 12 months!! There is a logjam between government & its principal shareholder, T.Rowe price over the appointment of CEO. The problem is government wants one of its babu to head as CEO but T.Rowe price being an MNC wants an professional to head as CEO. When it will get settled? If govt have its way and appoint a babu, will he be as dynamic as sinha? What happens when its fund managers leave due to govt interference (as the case with LIC)?? Basically there is no continuity at top management level by being a PSU and there is high chance of UTI returning to its old days of muddling without proper guidance.

    Instead i would invest in fund house like HDFC, quantum, Franklin-templeton, DSP black rock which has better investment process and track record.

    Would love to hear thoughts of all forum members.

    1. Ramesh says:


      absolutely perfect analysis. Good to hear your views.
      Actually, even I came to the exact same conclusion (since the aftermath of Fidelity’s exit, I had to re-evaluate the options).

      Thanks for posting this.


    2. bharat shah says:

      ‘(Between why does corpus value matters in selecting the fund??’
      i guess, one would prefer to go with the collective wisdom!

  7. Dear Ankur, please go ahead with UTI Div. Yield fund. This fund gels well in your portfolio.



    1. Ankur says:

      Thanks Ashal for ur valuable feedback. I am still open to recommendations from other experts since i want this be a part of long term planning.
      Am open to suggestions if i can get a better return on my investment.

  8. Dear Ankur, Can you elaborate the reasons of opting UTI Div. Yield in your portfolio for investments?



    1. Ankur says:

      Hi Ashal,
      I selected this on the basis of
      – corpus Value
      – Launch date- May 2005
      – Expense Ratio- 1.84
      – Risk Grade
      – Return value
      – reading valuable feedback of the experts on jagoinvestor space :).

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