Best Mutual Funds to invest in year 2018-2019
With the market booming at all-time high, we believe retail investors are more concerned about where to park their money. In this article, we have shared some exciting investment ideas, by way of mutual funds, which should help you take advantage of market valuations at the same time being run professionally in a transparent and ethical manner. We have included funds from different categories so that investors of varying risk appetite may select as per their requirement.
Large Cap – Invests primarily in blue-chip companies, least volatile equity category
Amidst the volatile market where the investors are concerned about market valuation and rising Sensex, investors tend to look out to minimize risk. Amongst this, we have found two mutual funds which invest in large cap funds whereby the investors seeks to get capital appreciation over the long term by investing in large cap companies with strong fundamentals.
- Aditya Birla Frontline Equity – This fund has generated significant alpha over benchmark and category over a decade. The fund maintains a large-cap allocation of over 80 per cent with remaining contributed by mid-cap companies. Good performance as highlighted in table above resulted to assets expanding to over Rs 19,790 crore by October 2017. However, owing to large-cap tilt, assets are not a constraint to performance. The fund is well diversified with around 70-80 stocks in portfolio. Lastly, steady management team manages the fund with style continuity. This results in low volatility and sustained performance.
- SBI Blue Chip Fund – The fund has been a consistent performer as it managed to beat its benchmark and category in each of the last five years. Despite being in large-cap category, fund is slightly tilted towards multi-cap. The portfolio is well diversified with around 100 stocks with around 20 per cent allocation to mid-cap segment. The fund also takes debt exposure at times but the allocation is generally less than 10 per cent. Ms. Sohini Adani is fund manager since Jan 2013.
Multi-Cap – Not restricted to any mandate; invests in all types of companies
- L&T India Value – The fund was started in 2010 – a difficult year for market. Ever since its launch the fund has returned consistent performance. The fund invests in under-valued stocks, below their intrinsic value, across market capitalization. The portfolio invests in companies across market capitalization and has around 35-40 per cent in large cap stocks followed by 25-40 per cent in mid cap stocks with the remaining constituted by small-cap companies. Due to focus on quality stocks, the fund has not only beaten its benchmark but also its category funds by a considerable margin over 3-year and 5-year period respectively.
- Motilal Oswal Most Focused 35 – The fund is a new entrant of its category and has delivered a good show during 3-year period that resulted in fund receiving a five-star rating. This fund follows the QGLP (quality, growth, longevity and price) framework to select stocks for investment. The fund is multi-cap fund with no sectoral constraints. The portfolio is fairly concentrated with around 20-25 stocks. While the fund’s track record is relatively low with only 3-year
performance record, the fund has beaten both benchmark and category by good margins over the last 3-years period.
Mid-Cap – Invests in companies that are mid-sized in terms of market capitalization. These funds are generally volatile but then it tends to outperform the markets in a bull run.
- Aditya Birla Pure Value – A true value fund that has been consistently rewarding investors with alpha over benchmark and its category returns. The fund is market-cap agnostic and thus do not have mid-cap stocks by design but is over-weight in mid-cap segment. The fund uses top-down analysis to assess economic situation and merges the same with the bottom-up fundamental research to identify stocks that are undervalued from their intrinsic value. Around 40-60% of the portfolio is invested in mid-cap with remainder occupied by large and small cap companies. For investors who feel market is on the cusp of bull run and seeks to buy value this fund is an ideal bet.
- Franklin India Prima Fund – A mid-cap dominated fund that puts around 60-70% of allocation in mid-cap segment, this fund has left its benchmark way behind over multi trailing periods. The fund has shown its adaptability to both cycle and style shifts in the market. After the 2008 crisis, the fund has made a strong comeback and has beaten both benchmark and category average while delivering impressive returns since inception.
Small-Cap – Invests in companies that are in early stage of business and depicts strong growth potential. These funds are risky during a volatile or bear market but has capability to generate excess returns over the long-term period.
- Reliance Small Cap – A fund which has consistently generated high returns within category and vis-à-vis its benchmark. The fund has 2/3rd of the exposure coming from small cap category. The fund adheres to simple philosophy of finding good business at an attractive price. Some of the key attributes the fund manager seeks to look while investing in companies include good management, reasonable valuation and opportunity to scale business. While the fund has close to 6-year of track record it has proven itself during both bull and bear phase of the market. Overall, we believe the fund is a reliable performer – all thanks to its microscopic lens on small-cap category.
- Kotak Emerging Equity – Kotak Emerging Equity has generated considerable Returns outperforming its benchmark and category during 3Y and 5Y period. The fund has 2/3rd of the exposure coming from mid-cap category followed by small-cap which accounts for around 15% and remainder being large cap. The fund follows a simple bottom-up stock picking methodology and seeks to invest in companies which could be the future growth driver and has bright growth prospects. The fund seeks to mitigate risk by taking small exposure in large-cap companies in times when the market behaves turbulent. Overall, we believe the fund is a good pick for someone looking to gain over the long term where companies go through business cycle.
Balanced Funds – Combination of Equity and Debt funds .
- L&T India Prudence – The fund has beaten both the benchmark and the category since 2012. The fund invests around 3/4th of the corpus in equities with remainder in debt. The allocation is maintained at similar levels consistently. Within equities – large cap constitutes around 50% of the portfolio with remainder in small and mid-cap segment. The Small & Mid-cap exposure for the fund is higher when compared to peers. The fund follows a value-oriented approach for selecting companies based on their business and financial parameters. In the debt-portfolio, the fund primarily seeks to generate low-volatility returns by investing in high credit-quality instruments without any aggressive calls.
- ICICI Prudential Balanced – The fund recorded impressive show over the last couple of years. The fund has 70 percent equity exposure and remaining in debt. Within equities, the manager maintains a large-cap bias with over 2/3rd exposure which is well above its peers. For the debt portfolio, the manager seeks to generate returns at regular interval thus relying more on duration than credit call. This helps the fund generate rolling returns at every interval. The fund has outperformed its benchmark and category consistently over multi-trailing period which supports its rating.
ELSS – Tax saving equity mutual funds.
The funds highlighted are among the best funds which provide both capital gain and also provide tax benefits under the ELSS scheme of Income Tax Act. Please note under ELSS, these funds have a lock-in period of 3-years.
- Axis Long Term Equity – The fund has managed a 5-star rating consistently since inception. The fund manager seeks to invest in quality stocks with a growth bias. This strategy has paid off well for the fund as seen by the superior returns generated over multi-trailing time period. When compared to peers in similar category, the fund has large-cap bias with total exposure to the segment at 65-70 percent followed by mid-cap at 25-30 per cent with marginal small cap position. The fund size has increased massively to Rs 15,223 crore as of Oct 2017 but its large cap bias allows it to mitigate the risk of high assets under management. The fund has convincingly outperformed its benchmark over 3-year and 5-year period but has remained marginally lower during YTD and 1-year performance. This was primarily on account of shift in the market cycle in favor of cyclical and beaten-down stocks and sectors which generally do not feature in fund’s holdings. Overall, we believe the fund is a safe pair of hands should you like to own quality businesses over long-term.
- Birla Sun Life Tax Relief’96 – One of the prominent funds in the category, Aditya Birla SL Tax Relief’96 has regained momentum over the past 5-years. The fund follows a multi-cap strategy with around 2/3rd exposure to large-cap segment and remaining to small-and mid-cap segment. The fund manager, Ajay Garg, seeks to implement bottom-up 360-degree view to identify companies which could make it to the list of investments for the portfolio. While the fund struggled during the years 2008 and 2011, it has surely outperformed over the long term whereby a business went through multiple business cycle. Overall, we believe the fund sticks to its quality based investing for both large and mid-cap segment.
Debt Funds – Invests in fixed income instruments and are safer than equity funds.
The funds highlighted above are debt funds which invest in fixed income instruments and have very low volatility in the returns; hence these funds are considered safe investment. There are many different categories of debt fund and we have chosen one fund each from Liquid (suitable for 0-3 months), Ultra short-term (suitable for 3 months – 1 year) and Short Term (suitable for 1-3 years). Liquid funds & ultra-short term funds are good substitute of regular savings bank account and short-term funds are of fixed deposits. These funds provide stability in the portfolio and should be a part of it based on the overall risk appetite of the investor.
- Birla Sun Life Floating Rate Fund – Ultra Short Term – The fund seeks to generate regular income by investing in portfolio comprising of floating rate debt / money market instruments. The fund has successfully managed to deliver higher returns when compared to benchmark and category average.
- SBI Magnum Gilt Fund – Short Term – The fund seeks to generate returns by investments in government securities. The instruments typically have an average maturity of less than 3-years. The fund has consistently outperformed its benchmark and category average.
- Tata Money Market Fund – Liquid – The fund seeks to generate stable income by investing in low risk, good quality floating rate debt or money market instruments, fixed rate debt or money market instruments. The fund has outperformed its benchmark and category average over multi-trailing time period. The fund is managed by Amit Somani since October 2013 thereby providing sustainability to the fund.
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