Mutual Fund Recommendation for FY 2018-19

“Change is the only constant thing in this world”

From “Mutual Funds are subject to market risk” to “Mutual Fund Sahi hai” there have been many changes in last few months.

Before we see the list of short listed mutual funds one can invest in this FY 2018-19, one should be aware of the changes which have taken place in last few months.

(Read till the end, you will not be disappointed :))

Changes due to ‘Categorisation and Rationalisation of Mutual Fund Schemes initiative’ of SEBI)

SEBI has specified 36 categories of mutual fund schemes in total. As per the new rules, the AMCs will not be allowed to offer two schemes under different names with identical investment mandates. One category of mutual fund will be permitted to sell only one mutual fund scheme. As a result of this mandate, the fund houses have now realigned their schemes and portfolios to classify them under the newly formed categories.

Changes in brief

Scheme name

Earlier, the mutual fund scheme names consisted of words like “opportunities”, “advantage” and “prudence” to make it look seemingly lucrative. However, the investor was unable to gauge the inherent risk while making an investment. After passing of the regulation, many scheme names have been changed in order to enhance existing disclosure.

Classification of Schemes

After the recategorization, SEBI has specified the entire universe of mutual funds to be classified under these 5 categories i.e. Equity, Debt, Hybrid, Solution oriented and others

Modification of scheme attributes

This includes the investment mandate, the benchmark and the investment strategy of each mutual fund scheme.

Changes in the Definitions

After implementation of the regulation, large-cap stocks would be the top 100 companies of the underlying benchmark in terms of full market capitalization. Mid-caps would be companies ranking from 101st to 250th and small-caps would be companies ranking from 251st onwards in terms of full market capitalization.

We note above, that almost everything has changed and the first thought is :

The past performance of many schemes are now irrelevant and so are the Mutual Fund Star ratings offered by various websites

Yes! You read it right, Star rating and Ranking for many schemes are now irrelevant as :

  1. To fall in line with SEBI mandate many schemes have been merged
  2. Fundamental Attributes have changed like some Midcap schemes are now Multicap and  some of the Multicaps are now in Focused categories.

Generally, Mutual Fund Star rating and ranking should not be the criteria to Select the fund.

Schemes Sub categories & its characteristics

Equity Mutual Fund Schemes

Sub Categories

Scheme Characteristics
Multi cap Min 65% in across Large, Mid & Small cap companies
Large cap Min 80% in Large cap companies
Large & Mid cap Min 35% in Large cap companies & Min 35% in Midcap companies
Mid cap Min 65% in Mid cap companies
Small cap Min 65% in Small cap companies
Dividend Yield Min 65% in Equities investing predominantly in Dividend yield stocks
Value Min 65% in Equities which should follow value strategy
Contra Min 65% in Equities which should follow contrarian strategy
Focused Min 65% in Equities (Maximum 30 stocks). Focus can be on large cap Multi cap, Midcap or Small cap
Sectoral Min 80% in stocks of a particular sector
Thematic Min 80% in stocks of a particular theme
ELSS (Tax Saving) Min 80% in Equity and Equity related instrument

 

Debt Mutual Fund Schemes

Sub Categories

Scheme Characteristics
Overnight Investment in overnight securities having maturity of 1 day
Liquid Maturity of up to 91 days only
Ultra Short Term Macaulay duration of the portfolio is between 3 months ‐ 6 months
Low Duration Macaulay duration of the portfolio is between 6 months‐ 12 months
Money Market Maturity of up to 1 year
Short Duration Macaulay duration of the portfolio is between 1 year – 3 years
Medium Duration Macaulay duration of the portfolio is between 3 years – 4 years
Medium to Long Duration Macaulay duration of the portfolio is between 4 years – 7 years
Long Duration Fund Macaulay duration of the portfolio is greater than 7 years
Dynamic Bond Investment across duration
Corporate Bond Min 80% in invested in Corporate Bonds
Credit Risk Min 65% in invested in Corporate Bonds below highest rated instruments
Banking & PSU Min 80% in invested in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions
GILT Min 80% in invested in Gsecs across maturity
Gilt Fund with 10 year constant duration Min 80% in invested in Gsecs such that the Macaulay duration of the portfolio is equal to 10 years
Floater Fund Min 65% in invested in Floating rate instruments

 

Hybrid Mutual Fund Schemes

Sub Categories

Scheme Characteristics
Conservative Hybrid 10 ‐ 25% in Equity related instruments & 75 to 90% in Debt instruments
Balance Hybrid 40 ‐ 60% in Equity related instruments & 40 to 60% in Debt instruments
Aggressive Hybrid 65 ‐ 80% in Equity related instruments & 20 to 35% in Debt instruments
Dynamic Asset Allocation/ Balanced Advantage Investment in equity/ debt that is managed dynamically
Multi Asset Allocation Min 10% investment in atleast 3 asset classes
Arbitrage Fund Min 65% in Equity related instruments which should follow Arbitrage strategy
Equity Savings Min 65% in Equity related instruments & Min 10% in Debt instruments

 

Solution Oriented Mutual Fund Schemes

Sub Categories

Scheme Characteristics
Retirement Fund Scheme having a lock‐in for at least 5 years or till retirement age whichever is earlier
Children’s Fund Scheme having a lock‐in for at least 5 years or till the child attains age of majority whichever is earlier

 

Other Mutual Fund Schemes

Sub Categories

 

Scheme Characteristics
Index Funds/ ETFs Min 95% in stocks of a particular Index
FoFs (Overseas/ Domestic) Min 95% in the underlying Fund

 

Do you still believe Selecting Mutual Fund schemes is simple? 😉

It’s not rocket science however, its not that easy to zero down on the specific scheme suitable to your requirements out of the thousands of Mutual Fund schemes available in the Market.

Have you come across any one who got super rich by Investing in some random 5 star or top ranking Mutual Funds or trading / investing in tip based Equity shares..??

Do you know what is Risk..?

“Risk comes from not knowing what you are doing”

You are investing your hard earned Money, please take informed investing decisions.

Coming to the subject of the Article…

Here is the list of…

Top performing Mutual Fund in India (It may stop performing anytime! Past performance does not Guarantee Future Performance)

Best Mutual Fund to invest in 2018 (There is nothing called Best in Personal Finance)

5 Star rated Mutual Mutual Fund  (Star Changes more frequent than you think, Don’t follow it blindly)

 

Shortlisted Mutual Funds to invest in FY 2018-19 by NIMIT Wealth Management 🙂 (July – Aug 2018)

(Well Researched. However, it may contain some Top rated, Best Mutual Funds or 5 star rated funds)

 

Equity – Large Cap

1) ABSL Focused Equity Fund  (Erstwhile ABSL Top 100 Fund)
2) Motilal Focused 25 fund       (Erstwhile Motilal most focused 25 fund)
3) SBI Bluechip Fund

 

Equity – Large & Mid Cap

1) DSPBR Equity Opportunities Fund        (Erstwhile DSPBR Opportunities)
2) Mirae asset Emerging Blue Chip Fund  (Earlier it was midcap scheme )

 

Equity – Multi Cap

1) ABSL Equity Fund
2) Franklin India Focused Equity   (Erstwhile Franklin India high growth co’s)
3) Kotak Standard Multicap Fund  (Erstwhile Kotak Select Focus Fund)
4) Motilal oswal Multicap 35 Fund (Erstwhile Motilal most focused multicap 35)
5) SBI Magnum Multicap Fund

 

Equity – Mid Cap

1) Franklin India Prima Fund
2) HDFC Midcap Opportunities Fund
3) L&T Midcap Fund

 

Equity – Small Cap

1) ABSL Small Cap Fund (Erstwhile ABSL Small & midcap Fund)
2) Franklin India smaller companies fund
3) Reliance small cap fund
4) SBI Small cap Fund

 

Equity – Value Oriented

1) ABSL pure value fund
2) HDFC Capital Builder value fund
3) L&T India Value Fund
4) Tata Equity PE Fund

 

Equity – ELSS (Tax Saving)

1) ABSL Tax relief’96 Fund
2) Axis Long term Equity Fund
3) DSPBR Tax Saver Fund
4) Franklin India Tax Shield
5) L&T Tax Advantage Fund
6) Reliance Tax Saver Fund

 

Hybrid – Aggressive (Equity Oriented)

1) ABSL Equity Hybrid ’95 Fund (Erstwhile ABSL Balanced ’95 Fund)
2) DSPBR Equity & Bond Fund (Erstwhile DSPBR Balanced)
3) HDFC Hybrid Equity Fund (Erstwhile HDFC premier multicap & HDFC Balanced)
3) L&T Hybrid Equity Fund (Erstwhile L & T India prudence fund)
4) Reliance Equity Hybrid Fund (Erstwhile Reliance Regular Savings Balanced)

 

Hybrid – Equity Savings

1) ABSL Equity Savings
2) HDFC Equity Savings Fund
3) L&T Equity Savings Fund

 

Hybrid – Dynamic Asset Allocation/ Balanced Advantage

1) ABSL Balanced Advantage Fund
2) ICICI Balanced Advantage Fund

 

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PLEASE READ THIS :
  • Asset Allocation is a MUST.
  • Above is just a list of Shortlisted Funds based on our internal research.
  • Selecting scheme of Mutual Fund is only half job done. How much amount to Invest in which Scheme is very crucial.
  • Investment decisions depend upon your Goals, Investment horizon, Risk profile, Existing Investments and various other factors.
  • Investing is a Serious Business, Don’t do it randomly.
  • Review periodically & Rebalance as and when required.
  • Have a reasonable expectation of Returns on your portfolio. Over Expectations hurt!
  • When you invest in Equity, give it time to perform atleast that much as you give your Gold and Real Estate. 🙂
  • If required, Take help of Financial Advisor to achive your Financial Goals (Even Virat Kohli and Lionel Messi have coaches to guide them)

 

CA Nitesh Buddhadev

CA Mitsu Buddhadev

Nimit Wealth Management

You may reach out to us at info@nimitwealthmanagement.com for any queries, suggestions or feedback.

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Busted! 7 Personal Finance Myths That Have No Truth to Them

“Humans live through their myths and only endure their realities..”

WHAT IS MYTH..?
A traditional story, especially one concerning the early history of a people or explaining a natural or social phenomenon, and typically involving supernatural beings or events (This is what Dictionary speaks)
In short MYTH means a widely held but false Belief or Idea..
 
Many MYTHS prevail in society and the topic of “Personal Finance” is no exception.
Below are a few MYTHS on Personal Finance and the REALITY..

 

Myth 1 :
Financial Planning or investment planning means less spending i.e. becoming miser and hence less enjoying our life.
Reality :
Following a financial plan or investment plan means making guilt free spending and hence enjoying our life more.
[ When we first make necessary investments and then spend… then that is called ‘guilt free spending’.]

 

Myth 2 :
Paying premium for term insurance (a life insurance policy where if nothing happens to policy holder, nominee gets nothing) is a wasteful spending.
Reality :
If we live up to the age of 65 years, then Investment [MF, Shares etc] will take care of our family’s financial future. And if not, then TERM PLAN will.
Insurance is not an investment product; it is a protection instrument.
Buying a Term Insurance is like buying a Fire Extinguisher.
1. You wish that you will Never have to use it.
2. You don’t ask for a refund when it expires.
3. If need be it will save you and your family in time of difficulty.

 

Myth 3 :
There are many investment products available in the market – some are good and some are bad. We should always invest in good products.
Reality :
An investment product can never be good or bad, it can only be suitable or not.
Some investment products can be suitable for short-term goals, but not for long term. The opposite is also true – a product which is perfectly suitable for long term goals, can be a horrible choice for short term goals.
Hence we must always look for ‘suitability match’ when deciding on a product.
Myth 4 :
Like shares, fixed deposit, property or gold – mutual fund is also an asset class.
Reality :
Mutual fund is not a separate asset class as such. It is actually a ‘well-managed container’ which can contain different asset classes in it.
There are mutual funds which only invests into certificates of deposit. Then there are funds which are known as real estate fund or gold fund. And of course there are equity funds as well and mix of Equity and debt i.e Balanced Fund.
So, mutual fund gives you the facility to invest into different asset classes through it.

 

Myth 5 :
If I want to secure my retirement, I should invest in a Retirement Plan or Pension Scheme. Similarly if I want to secure my child’s future, I should invest in a Child Plan.
Reality :
While investing for a goal, name of the goal is never important. Instead nature of the goal is important – like after how many years the goal is due etc. This is because –  mathematics only understand numbers, not names.
Never go for attractively named investment products. Instead always go for simple, generic, all-purpose products and tag it or link it to a goal by yourself.
Packaged investment products are often found costly, illiquid and restrictive..

 

Myth 6 :
If I come to know of someone who has earned good return by investing in a particular product – my job becomes easier. I should simply invest in that product.
Reality :
Unfortunately it is not that simple. Many things (in regards to finance) of the other person may not be same as yours. Such as – financial background, current assets and liabilities, dependents and their age, income – expense, nature of job / business, liquidity needs, insurance and so on. It is almost impossible that your situation will be exactly same as of the other person.
Investment should always be made keeping every aspects in mind. It should never be made in isolation or adhoc. Personal finance is after all – ‘personal’.

 

Myth 7 :
I have made investments as required. Taken adequate insurance also. I have done my part. Now I am feeling happy and relaxed.
Reality :
Congratulations for whatever you have done so far! But sorry to say – that is not enough. If your answers to all the below 3 questions are not ‘Yes’, then you have reasons to worry:
1) Have you kept all your policy documents, statements, certificates – physical or digital – systematically  in one place so that your spouse or children can find those quickly without your help?
2) Have you kept right holding patterns in all your investments, made nominations or prepared a Will?
3) Are you reviewing your investments and insurance at regular interval..?

 

Compiled and Edited by
CA Nitesh Buddhadev – NB
Nimit Wealth Management
nitesh@nimitwealthmanagement.com
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