Skip to main content

Mutual Funds Create Wealth with Active Portfolio Management

Buy Gold Mutual Funds

Invest Mutual Funds Online

Download Mutual Fund Application Forms

Such funds follow a sound investment strategy, reduce downside in bad times and deliver superior returns when markets go up


Investors include equities in their portfolios because they know, or they have been told, that is the best way to generate higher extra returns. But in the last five years, equity has underperformed other asset classes, including fixed income and gold. Nifty Index has delivered 3.54% returns in the last five years as on June 7.

The CRISIL SPIVA report for December 2011 points out that 65% of the large-cap equity mutual funds have underperformed Nifty during the period. In such a scenario, investors often wonder whether it really makes sense to invest in actively-managed funds and pay a higher fee to a fund manager to take care of the money when he or she can't even beat the index. Information asymmetry remains a peculiar feature of Indian markets, which gives ample scope for active management of fund. You should invest in well-managed equity funds with a long track record for reasonably high returns than the index over the next five years.


Don't laugh at that statement. In fact, there are around 13 diversified funds that have delivered double-digit returns during the last five years.


For beginners, an actively managed fund prefers to buy stocks using an investment strategy — it could be value, growth, quant or mix of all — to generate returns in excess of the markets.


This is diagonally opposite to an index fund, which prefers to replicate the index in its portfolio. Index funds are popular in developed markets, which are information-efficient.

But Indian markets are different. Indian investors still prefer to be with actively managed funds. Of the . 1,48,310 crore invested in equity funds, only . 4,217 crore are invested through index funds, as per May statistics. An index fund assures you exposures to the underlying index at the least possible cost. But it has its own disadvantages. As the fund manager remains invested in all times, there is no opportunity to book profits. And there is no question of making more returns than the broader market. An active fund manager tries to do exactly that.


An active fund manager aims to bring in alpha — excess returns over market returns — by sector selection and stock selection after rigorous research. By modifying allocation to particular sectors, the fund manager can increase the beta of the portfolio to help the fund participate in rallies. Towards the end of CY2011, some fund managers picked up infrastructure companies at attractive valuations, which moved much faster than the market when the market turned up in the first quarter of CY2012.


If the fund manager senses weakness in the market, he may choose to reduce the beta of the portfolio to contain the downside. He may choose to look at defensive sectors in such times. For example in early 2011, some seasoned fund managers preferred to go overweight on FMCG stocks to defend their portfolios. Of course there is a more aggressive strategy too.
A fund manager can occasionally take cash calls, too, if he senses a steep correction. When the market is moving down, keeping some part of the portfolio in cash certainly limits downside. Of course, the fund manager has to be careful with cash calls, as a sudden rally in stocks can pull down the scheme's performance. Many funds restrict their cash exposures to a maximum of 10% to limit this risk.


A good actively managed fund should reduce the downside in bad times and deliver superior returns than the market returns in the long run. In most cases, a value-oriented investment strategy should work better than a momentum-chasing one. The 13 schemes that have offered double-digit returns over the last five years include six schemes that have clearly defined their investment strategy to be value-driven. Disciplined approach towards money management seems to deliver for most of these schemes.


The investing community, too, has taken cognizance of this performance and has rewarded the winners. The days when each new fund offer would raise a few hundred crores are long gone. Nowadays, schemes that have a good track record and are managed by a fund house that has got its processes in place gets most of the new investments. Six of the 13 schemes that have performed well over the last five years have more than . 1,000 crore assets under management. HDFC Top 200, the largest equity diversified fund in India with . 11,381 crore in assets, also appears on the list.


The abolition of entry loads on mutual funds has left distributors with trail commission as the only reliable source of income. To earn consistently, professional distributors prefer to be with schemes that have shown good performance.


It is the time to steer clear of schemes showing occasional spikes in performance. As the markets show some signs of recovery on talks of possible improvement in liquidity and cash flows to India from developed world, investors would be better off being with time-tested actively managed funds to ensure long term wealth creation.

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds        Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds     Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds    Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds             Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds              Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Gold Mutual Funds             Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

Popular posts from this blog

SBI Magnum Tax Gain Scheme 1993 Applcation Form

    https://sites.google.com/site/mutualfundapplications/tax-saving-mutual-funds-elss     Investment Details Basics Min Investment (Rs) 500 Subsequent Investment (Rs) 500 Min Withdrawal (Rs) -- Min Balance -- Pricing Method Forward Purchase Cut-off Time (hrs) 15 Redemption Cut-off Time (hrs) 15 Redemption Time (days) -- Lock-in 1095 days Cheque Writing -- Systematic Investment Plan SIP Yes Initial Investment (Rs) -- Additional Investment (Rs) 500 No of Cheques 12 Note Monthly investment of Rs 1000 for 6 months and quarterly investment of Rs 1500 for 4 quarters.

Birla Sun Life Tax Plan Online

Invest Birla Sun Life Tax Plan Online   An Open-ended Equity Linked Savings Scheme (ELSS) with the objective to achieve long-term growth of capital along with income tax relief for investment.   After a bad patch from 2008 to 2010, Birla Sun Life Tax Plan has made a big comeback in the last five years, with a particularly good run since 2014. The fund's rankings, which had slipped to two stars in 2011-12, recovered sharply to three-four stars in the last three years. The fund has delivered a particularly large outperformance over its benchmark and peers in the last couple of years. The fund's investment strategy focuses on a diversified and high-quality portfolio, with parameters such as capital ratios and balance-sheet strength used to judge quality. It uses a combination of top-down and bottom-up approaches to take sector/stock positions. The fund avoids highly leveraged plays. Staying more or less fully invested at all times, the fund parks roughly half of its portfoli

Should you Roll Over 1 year Fixed Maturity Plans?

The period between January and March typically sees an uptick in the launch of fixed maturity plans, or FMPs. Not this year. Instead, fund houses are busy rolling over or extending the tenure of their one- year FMPs launched last year to three years. Investors in one- year FMPs have a choice. Either redeem units or roll over to three years. If you exit now, your gains will be added to your income and taxed in line with your individual slab rate of 10, 20 or 30 per cent. If you stay invested for two more years, you pay 20 per cent tax with indexation benefit. Yields have softened in the past few months on expectations of a rate cut. If the central bank continues its soft monetary stance, yields are likely to fall further. In such a scenario, it makes sense for investors, particularly those in the 30 per cent tax bracket, to roll over their investments and lock in at a higher yield now. In a surprise move, the Reserve Bank of India cut repo rate by 25 basis

Mutual Fund Review: IDFC Premier Equity Fund

  IDFC Premier Equity Fund, which falls under the presumed high risk group of mid- and small-cap schemes, can rely on astute and timely equity picks. These make it less vulnerable to fluctuations compared with others in the category   IDFC Premier Equity Fund is designed to invest in upcoming, but promising businesses available at cheap valuations, and hold on to these businesses until they reap desired returns. The experiment has been successful so far, and IDFC Premier Equity has emerged as one of the top performing mutual fund schemes in the mid- and smallcap category of equity schemes.    While the scheme is an open-ended equity fund, i.e. open for subscriptions throughout the year, it has a unique philosophy to limit fresh inflows. Thus, while an investor can always take the systematic investment plan ( SIP ) route to invest in the scheme throughout the year, inflows through a lumpsum investment have been restricted. Since inception, IDFC Premier Equity has been opened for l

IDFC Premier Equity Fund dividend

  IDFC Mutual Fund   has announced dividend under the dividend option of   IDFC Premier Equity Fund Direct-D . The quantum of dividend shall be   R 4.3464 per unit.   The record date has been fixed as May 06, 2015. Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. ICICI Prudential Tax Plan 2. Reliance Tax Saver (ELSS) Fund 3. HDFC TaxSaver 4. DSP BlackRock Tax Saver Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. Canara Robeco Equity Tax Saver 8. IDFC Tax Advantage (ELSS) Fund 9. Axis Tax Saver Fund 10. BNP Paribas Long Term Equity Fund You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds Invest in Tax Saver Mutual Funds Online - Invest Online Download Application Forms For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call --------------------------------------------- Leave your comment with mail ID and we will answer them OR You can write to us at PrajnaCapital [at] Gmail [dot]
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now