Mutual Fund selection – large cap/small cap/mid cap

POSTED BY Rajat Bhatia ON February 28, 2013 12:23 am COMMENTS (29)

Hi,

 Here are the Mutual funds I have started investing couple of months back, can you please suggest the fund are well diversified and will give me good return in long run?

Axis Focused 25 Fund (G)

Axis Mid Cap Fund (G)

Birla SL India GenNext (G)

ICICI Pru Focused Bluechip Eqty (G)

IDFC Premier Equity – A (G)

SBI Magnum Balanced Fund (G)

SBI Emerging Businesses Fund (G)

29 replies on this article “Mutual Fund selection – large cap/small cap/mid cap”

  1. vijaya kumar Tadikamalla says:

    First of all, Sorry for posting my question here. As I am new to this blog I don’t know how to create a thread to my question.
    Recently I came to know about your blog through my friend and seeing this very informative. As I am new to SIP, I learnt a lot of things from your blog. I need a advice from you. As I want to start a SIP below are my options. Please give me your expert advice. My age is 29, married but no child and I am some risk taker for good returns of 15% for long term say more than 15 years.

    Generally my savings would be monthly Rs.5,500

    Large cap Funds – 40% Approx.
    Birla Sun Life Frontline Equity – Rs. 1000
    HDFC top 200 – Rs. 1000

    Large & Mid cap Funds – 15% Approx.
    Quantum long term equity – Rs. 1000

    Mid & Small cap Funds – 15% Approx.
    HDFC Midcap opportunities fund – Rs. 1000

    Diversified Equity funds – 20% Approx.
    PPFAS long term value fund – Rs. 1000

    Sector Funds – 10 %
    ICICI Prudential FMCG – Rs. 500

    Is there anything I need to change let me know.
    Thanks in Advance

  2. Dear Ashish, my job is done as you got the theme of the reply. Thanks for understanding me. Actually I want to use your own brain in your own benefit. Sometimes, people like it & some times not but that’s how i want to work with all of you. 🙂 😉

    thanks

    Ashal

  3. Dear Ashish, Why only in 2-3 stocks & why not replicating all the 30-40-50 stocks? After all yopu can get the research free of cost. As the fund manager has done the research for the portfolio & just y tracking his portfolio in the fund, you are able to save your hard work & now you can save the fund management fee & can do wonders for your portfolio by investing directly with a minimal cost on demat & brok. charges.

    Sound Interesting & easy to follow. No? why?

    Your turn to tell me. So over to you. :0

    thanks

    Ashal

    1. Ashish says:

      Dear Ashal,

      While I was writing the earlier query, I was actually writing that please don’t answer the question by asking another question to me, because I was sure you will definitely do so and you did 😉

      I am still thinking… what to say…

      I think, I should go with your suggestion of 30-40 socks… ha ha ha

      Thanks, got your point!!!

    2. Ashish says:

      Dear Ashal,

      While I was writing the earlier query, I was actually writing that please don’t answer the question by asking another question to me, because I was sure you will definitely do so and you did 😉

      I am still thinking… what to say…

      I think, I should go with your suggestion of 30-40 stocks… ha ha ha

      Thanks, got your point!!!

  4. Dear Ashish, glad to know that you understood the point & meaning of diversification. 🙂

    thanks

    Ashal

    1. Ashish says:

      Dear Ashal,

      Thanks. Also, by looking at both these funds and the way there are being managed, will be it be a good idea to invest in 1-2 stocks held by Quantum Long Term Equity, since I am not investing in the MF.

      It is just a wage thought that came to my mind. Of course direct stocks are much more riskier and need thought, knowledge and understanding. Considering the fund managers have chosen to select in these stocks after much consideration, why shouldn’t I take this benefit, at my own risk of course.

      As usual, your humble guidance please.

      Regards

  5. Dear Ashish, please check on your own that the diversification is there or not in your choice of funds.

    Thanks

    Ashal

    1. Ashish says:

      Dear Ashal,

      I have checked the portfolio of the funds suggested by you (Franklin India Bluechip and Quantum Long Term) and realised that most of the stocks held by these funds are not duplicated and are all large cap stocks.

      I have also checked the portfolio of HDFC Mid Cap fund and at present decided to keep Franklin India Bluechip and HDFC Mid Cap. I have invested Rs.5000 in each of these 2 funds and from next month onwards, SIP shall continue with the same amount for next 2 years.

  6. Dear Palani, normally I only recommend growth option as the money is to be invested for long term so receiving dividend in between does not make sense. Selection of Dividend is advised only in special cases.

    Hope I’m clear this time. Sorry for not making this point clear in my original reply.

    Thanks for pointing out the mistake.

    Thanks

    Ashal

    1. Palanisamy says:

      thanks for clarifying my question, ashal.

  7. Palanisamy says:

    Hi Ashal,

    I have a question on the below two mentioned MFs based on one of your reply in this thread.

    Franklin India Blue Chip
    Quantum Long Term Eq.

    I could see two different schemes on the above fund, i.e Growth(G) & Dividend(D).

    Based on what I saw in fundsindia.com(where I’m doing my investment), i would assume you’re referring to Growth(G) scheme only. Please clarify.

    Thanks in advance!
    Palani

  8. Dear Rajat, the 2 funds opted out by me ‘ll provide a fairly diversified portfolio to you. Still if you want to go for a midcap fund, you may opt either IDFC Prem. Eq. or HDFC Midcap opp.

    Please invest in direct option for each fund of your choice.

    Thanks

    Ashal

    1. Palanisamy says:

      Hi Ashal,

      I have a question on the below two mentioned MFs based on one of your reply in this thread.

      Franklin India Blue Chip
      Quantum Long Term Eq.

      I could see two different schemes on the above fund, i.e Growth(G) & Dividend(D).

      Based on what I saw in fundsindia.com(where I’m doing my investment), i would assume you’re referring to Growth scheme only. Please clarify.

      Franklin-India-Bluechip-Fund(G): http://y.ahoo.it/8mWQ0
      Quantum-LT-Equity-Fund(G): http://y.ahoo.it/EjM+m

      Thanks in advance!
      Palani

  9. Dear Rajat, please tone down your expectation from 15% to 12% level. if you actualy get moe than 12%, treat this as your bonus & pure luck nothing else. Regarding the selection of funds, please do not invest at all in Eq. funds based upon for such short term performance & again for your short period. Investment in Eq. should be done only for long term (by the way, my long term start after 15Y 🙂 ). So be ready to amend your choices.

    if I’m in your place, I w’d invest in only 2 funds.

    Franklin India Blue Chip
    Quantum Long Term Eq.

    thanks

    Ashal

    1. Rajat Bhatia says:

      Thanks for your inputs Ashal, this helps. I am already in the process of investing in Quantum Long Term Eq, and will amend my other choices also in near future based on performance.
      You didn’t mention any mid/small cap fund. Any reason? I am willing to take risk at this age.

      Also, I want to invest in direct funds now, Do you suggest any HDFC fund (same bracket as Franklin blue-chip or any top performers in mid/small/ balance category), as it is much easier by HDFC bank adjacent to my workplace.

  10. Dear ASHISH & Dear RAJAT, a common question to both of you, on what basis you people picked your funds?

    Thanks

    Ashal

    1. Rajat Bhatia says:

      Dear Ashal,

      I have picked my funds purely based on very short past performance (1 year or so), I know that’s not a wise decision at all. Axis funds are only 6-12 months old and didn’t taste the market well. But what’s done is done. I will stock to it at least for 1 year or so and then move if not comfortable.

    2. Ashish says:

      Dear Ashal,

      Like Rajat, I have also selected these finds purely on the basis on past performance 1 yr or more.

      Nothing scientific behind the selection.

      Regards,

  11. Dear Rajat, sample an example below –

    Year 1 RETURN +40%
    2 -55%
    3 +25%
    4 +11%
    5 -65%

    This is how your investment may perform. Now do tell me, are you ready for such bumpy rides?

    Thanks

    Ashal

    1. Rajat Bhatia says:

      Hi Ashal,

      Thanks for your reply. As I said, I am expecting 13-15% return after 10-15 years. I know market returns varies as you said 1 YR +40%, 2 -55% etc., and that’s why SIP works well. I am completely ready and already started the ride.

  12. Ashish says:

    Dear Sirs,

    I would also like to be part of this question.

    I have also shortlisted some of these funds and would start investing in a day or two (let the salary gets credited). I have shortlisted:

    Axis Focused 25 Fund (G)
    Birla SL India GenNext (G)
    SBI Magnum Balanced Fund (G)
    SBI Emerging Businesses Fund (G)

    each with an SIP of Rs.2,000 for next 2 years. The basis of selection is past performance and nothing else. Recently I read the article on “Why past performance should not be looked at anymore” and is slightly confused on what next.

    Need your help.

    Similar to Mr. Rajat, I am also looking at about 12-15% returns.

    1. Rajat Bhatia says:

      Ashish,

      I am also a new comer like you in mutual funds but what I feel is – 2 years is a very short timeframe to invest in equity mutual funds, and the all fund chosen by you are equity (except SBI Magnum Balanced – which has around 25% debt).
      You should invest at least 4-5 years to get good returns by equity mutual funds, otherwise can go for debt, and balance funds for short time frame. Experts can advise you better here.

      1. Ashish says:

        Dear Rajat,

        The initial SIP is only for 2 years that I am taking, if the fund is performing I will reinstate the SIPs again otherwise shall use the STP to move to another fund.

        Therefore investment time is not just 2 years, it is a regular which I will keep on reviewing. Also, I would rather like to stick to Equity (Large / mid / small) and Balance than to debt. For debt with 8-9% return, I am fine with PPF / FD / RD giving almost the same return and guaranteed as well. The only difference would be PPF / RD etc are more ill-liquid than the debt funds, but when I am looking at a period of 2-5 years or may be more it won’t treally make a difference.

        Regards,

  13. Dear Rajat, please define your good return.

    Thanks

    Ashal

    1. Rajat Bhatia says:

      Hi Ashal – I am expecting 13-15% (or may be more by some of them) in long run.

  14. Too many funds.

    Franklin India Blue Chip or ICICI Pru Focused Bluechip Eqty along with IDFC Premier Equity
    should do the job.

    You could add a balanced fund like HDFC prudence for a little stability.

    No one can predict the future. You only invest with expectation. You need to monitor them at least once a year

    1. Rajat Bhatia says:

      Hi FFC, thanks for the advice.
      Ya, I realized its too many funds – I may be closing some of them based of performance after 1/2 years.

      Franklin India Blue Chip – is very good fund, and performed very well since very long but that’s why it seems that after giving high returns for so many years a fund can reach to its saturation level and for its high NAV – it may start under performing in future. For same reason I avoided HDFC top 200. Is my logic sense? Or is it completely irrelevant?

      1. This logic is not correct. A fund is only as good as the stocks it invests in. These are large cap funds. By your logic a large cap company will not get any more profit. If that is so all the large caps will eventually close! A good portfolio needs large cap mid- and small cap stocks. Each has its own place providing different kinds of risk and therefore returns,

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