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POSTED BY ON December 22, 2011 10:37 am COMMENTS (8)
Hello Friends,
I am a new bee to the world of investing and mutual funds. Thanks to Manish for educating many people towards the importance of investing early.
I have gone through the information and comments provided by users on this forum and followed valueresearchonline as indicated by Manish in Mutual funds selection process.
I have compared UTI-Oppurtunities and HDFC Top 200 Growth fund, both funds belong to the category Large-Mid Cap as per Value research online website.
Just by looking the last three years performance, UTI oppurtunities has done better than HDFC Top 200. And apart from the returns below are the parameters which i looked at:
R Squared value for UTI is 0.92 and for HDFC Top 200 its 0.95, considering the difference of 0.03 small, alpha of 10.02 for UTI appears to be better than 6.57 for HDFC Top 200, meaning UTI risk adjusted returns are better than HDFC Top 200. Also beta for UTI is 0.86 and for HDFC its 0.94 so when markets are falling, UTI might loose less than HDFC.
Standard deviation for HDFC is more at 25.77 and for UTI its 23.87. So HDFC is better when fund is giving possitive returns but not that good during negative returns. Also Sharpe ratio is better for UTI.
The P/B ratio for UTI is 6.15 and HDFC is 3.99 and P/E ratio for UTI is 21.49 and for HDFC its 18.50, they seem to be in favor of HDFC top 200. From P/E definition – The investor might have to pay less amount in HDFC top 200 fund for same amount of returns that they might get from UTI.
Using all these parameters and from the last three years performance, i am little bit inclined towards UTI Oppurtunities fund.
Friends please let me know if i am following the parameters correctly or do you think i am missing something while analyzing funds. Your help is really appreciated.
Best Regards,
Sridhar.
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Dear Sridhar, if the fund in question is able to beat or at least mirror it’s benchmark continuously, you should not worry for the high performance generated by other funds. In case, the fund is lagging in performance & not even able to beat it’s benchmark successively for 18-24 months time frame, the time is ripe to change boats.
By the way for 5Y period, a fund should generate at least category average return or slightly better than that.
Thanks
Ashal
Thanks friends for all your valuable insights it would really help me in selecting a fund, just one last question. Suppose i have selected a fund today and invested in it for a period of 3-5 years and at that time if the fund is not performing that well, what should be the approach. Is it a good idea to remove the funds from the current fund systematically and invest in a different fund. Or should i leave the current fund and invest in a different fund which is performing well at that time.
Will the advantage of compounding still available in the first case, if i continue to move the investment from a non performing fund to a performing fund.
Best Regards,
Sridhar.
Have an investment time frame of 3-5 years when investing in an equity diversified fund. Next, look for a fund that has been consistent over different market cycles than select one that has earned high returns in a particular year. Look at fund management charges (expenses) and not just returns and also how long a fund manager has managed the fund. For instance HDFC Top 200 has been managed by Prashant Jain for long compared to UTI Opportunities which is being currently managed by Anoop Bhaskar who took over from Harsha Upadhyaya who was managing till July 2011.
Finally; get over the inertia of thinking about investing and analysing numbers; both these funds will be in the top 10 in the category in a given year with returns. Invest regularly through SIPs and review the investment at least once a year because mutual fund investing is not invest and forget; it is dynamic. Moreover, a fund that is good today need not remain so forever. You should check the progress made by your investments and decide on continuing investments or changing funds.
Narayan
Dear Sridhar, For all the hard work put in by you, my simple take –
Kiss – Keep it simple silly.
Instead of calculating too much, just read the last reply of dear Santosh Navlani that for SIP, the last 3Y & 5Y returns are not different meaningfully.
Chose anyone & move ahead.
Thanks
Ashal
Hi Sridhar,
i must appreciate your effort and analysis! If every investor in India starts doing this, mis-selling would stopped for sure!
Based on pure quantitative analysis, your conclusion is on the right side. But then, if 1 were to look at 3/5 year SIP returns they may not be very wide in absolute terms. In fact, the difference for a Rs. 1000 SIP in UTI and HDFC funds you mentioned above is apprx. 4000 for 3 years & about 8000 for 5 years….with difference being +ve for UTI (i have used moneysights calculator for SIP here https://www.moneysights.com/mutual-funds/details/205/HDFC-Top-200-Fund—Growth).
I don’t see any meaningful difference if this is a choice between 2 funds. You can pick any & 1 thing thats sure is you should make good returns given the performance history. i’m not sure if you have used moneysights simplified view & details page of a Mutual Fund…all the analysis you did gets crunched in a report card format on moneysights. This link may be useful https://www.moneysights.com/mutual-funds/simplified-view.
—
Santosh Navlani | moneysights.com
Your analysis is correct for most part.
A fund with lower Standard Deviation is actually better because the range of returns is narrow with a lower SD.
However with a lower comparative P/E and P/B the appreciation potential for HDFC Top 200 is higher when markets rebound (which they eventually will)
UTI Opp is in general a good pick. HDFC 200 has a consistent track record going back to 15+ years while UTI Opp. has been around for 6 years. I would tilt towards HDFC Top 200 due to their long term performance record.
Disclosure: I invest in HDFC Top 200.
Your analyses has got 2 main issues:
1. It is completely based upon quantitative parameters, and nothing related to the quality of the management team and fund manager is there in it.
2. All the analysis is of last 3 years. The main thing to remember is that these are not going to predict the future.
Personally, I dont have investment in either of them.
Hi
The important part is that you start investing towards ur goals in either funds. Too much analysis will not help in reaching your goals.
Happy Investing !
Regards