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Mutual Fund Stock Portfolio

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ONE detail many investors look at is the ownership pattern of companies they want to sink their money in.

Within the ownership pattern data there is a sub category showing the extent to which mutual funds hold shares in a company. The question is whether looking at the mutual fund holding pattern both on an overall as well as individual fund level is actually important for individuals as far as their investment decisions are concerned. Sample the details and see how investors can make the most of situations they actually face.

Nature of stocks:

One of the first factors to check while investing in a mutual fund is the nature of stocks that are actually held by it.

Sometimes the details about the holdings tell you some important things about the fund and just a look at the stocks held in its portfolio would be enough to give you an overall picture. This is especially true when it comes to holdings that are represented by large-cap stocks where the names are well known and, hence, the stocks too are widely held. It will be clear enough that in case of such large-cap holdings, there are a lot of other investors who will have a stake and, hence, liquidity and other issues are not such a big concern for the mutual fund as well as investors.

Down the chain:

The scene shifts when the mutual fund you plan to invest in or have invested in holds several stocks in the mid and small-cap space. Concerns arise about these holdings.

There are mid and smallcap funds where the holdings have to be compulsorily from this area, thus just having such holdings is not the concern. The problem arises when the holdings are being accumulated in stocks that are not very liquid. This means volumes in these stocks are low. There is a high return risk reward present here in the sense that getting such stocks before the market spots it can be a big winner. Several mid-cap funds have actually done such a thing and earned great returns for their investors.

However, if things go wrong then the fund could end up holding the stocks with little in terms of ability to offload these as liquidity dries up in the counter.

Specific holdings:

One of the other points that often arise is also some warning signs that need to pop up when there are holdings in the fund portfolio that are slightly different from what is normally seen. This could mean some companies are present in the portfolio where the other funds or institutions are not willing to take a stake or have not actually done so. There can be two reasons why this has happened. One is that the mutual fund is ahead of the curve and, hence, has built a position that can prove to be valuable if the market catches on to the potential that the fund has spotted.

On the other hand, there could also be a situation where the fund is disregarding the risks that have been spotted by other investors and, hence, this could be a potential high-risk investment in the making.

On the whole, investors should not look at just one or two holdings in the portfolio to come to any conclusion. They need to see the situation in the perspective of the prevailing conditions with relation to the fund and the markets.

This will let them get an idea of the overall risk they face and this is an important part because all that they want is to reduce the risk in their quest to get some returns on their investment. Once this aspect is controlled then the process becomes smooth and the experience is good.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

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You can write back to us at PrajnaCapital [at] Gmail [dot] Com

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

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These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax Plan Invest Online
  2. HDFC TaxSaver Invest Online
  3. DSP BlackRock Tax Saver Fund Invest Online
  4. Reliance Tax Saver (ELSS) Fund Invest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) Fund Invest Online
  7. SBI Magnum Tax Gain Scheme 1993 Invest Online
  8. Sundaram Tax Saver Invest Online
  9. Edelweiss ELSS Invest Online

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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. Tax Saver MutualFunds Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

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