“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
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 :
- To fall in line with SEBI mandate many schemes have been merged
- 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
||Min 65% in across Large, Mid & Small cap companies
||Min 80% in Large cap companies
|Large & Mid cap
||Min 35% in Large cap companies & Min 35% in Midcap companies
||Min 65% in Mid cap companies
||Min 65% in Small cap companies
||Min 65% in Equities investing predominantly in Dividend yield stocks
||Min 65% in Equities which should follow value strategy
||Min 65% in Equities which should follow contrarian strategy
||Min 65% in Equities (Maximum 30 stocks). Focus can be on large cap Multi cap, Midcap or Small cap
||Min 80% in stocks of a particular sector
||Min 80% in stocks of a particular theme
|ELSS (Tax Saving)
||Min 80% in Equity and Equity related instrument
Debt Mutual Fund Schemes
||Investment in overnight securities having maturity of 1 day
||Maturity of up to 91 days only
|Ultra Short Term
||Macaulay duration of the portfolio is between 3 months ‐ 6 months
||Macaulay duration of the portfolio is between 6 months‐ 12 months
||Maturity of up to 1 year
||Macaulay duration of the portfolio is between 1 year – 3 years
||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
||Investment across duration
||Min 80% in invested in Corporate Bonds
||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
||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
||Min 65% in invested in Floating rate instruments
Hybrid Mutual Fund Schemes
||10 ‐ 25% in Equity related instruments & 75 to 90% in Debt instruments
||40 ‐ 60% in Equity related instruments & 40 to 60% in Debt instruments
||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
||Min 65% in Equity related instruments which should follow Arbitrage strategy
||Min 65% in Equity related instruments & Min 10% in Debt instruments
Solution Oriented Mutual Fund Schemes
||Scheme having a lock‐in for at least 5 years or till retirement age whichever is earlier
||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
|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)
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
1) DSPBR Equity Opportunities Fund (Erstwhile DSPBR Opportunities)
2) Mirae asset Emerging Blue Chip Fund (Earlier it was midcap scheme )
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
1) Franklin India Prima Fund
2) HDFC Midcap Opportunities Fund
3) L&T Midcap Fund
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
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)
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 firstname.lastname@example.org for any queries, suggestions or feedback.