equity mutual fund

Does holding cash affect equity mutual fund performance?

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A question that I was recently asked with regards to investing in equity mutual funds was whether a fund should be fully invested in equity at all times or should it be holding cash if need be?

There were two arguments against a stay in cash strategy.

One, holding cash can lead to underperformance as the markets may rally faster than the funds can search for opportunities and deploy the cash.

Two, how can a fund hold cash and charge a Fund Management fees of 1% to 2% or more? The investor pays fund management fee to make investment in equities, not for holding cash.

Let’s see if these arguments hold any water.

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Investing in Equity Mutual Funds – a perspective from Rajeev Thakkar of PPFAS MF

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Investing In Equity Mutual Funds with Rajeev Thakkar of PPFAS MF

Individuals are keen to invest in mutual funds but there is this rampant confusion still prevailing on what exactly is a mutual fund and how does it work. Should one go for direct stocks or an equity mutual fund? The number of mutual funds out there compounds this confusion further.

That’s where I reached out to Rajeev Thakkar, the CIO and Director of PPFAS Mutual Fund, who was kind enough to share his views and provide answers to some of the “top of the mind” investor queries.

Rajeev Thakkar possesses close to 2 decades of experience in various segments of the Capital Markets such as investment banking, corporate finance, securities broking and managing clients’ investments in equities.

Rajeev has been associated with PPFAS Limited (the Sponsor of the AMC) since 2001. He was appointed the Fund Manager for the erstwhile flagship scheme of the Portfolio Management Service, titled “Cognito” in 2003.

He is a strong believer in the school of “value-investing” and is heavily influenced by Warren Buffett and Charlie Munger’s approach. Apart from his technical ability, what distinguishes him from many others is his ability to stand his ground and remain unflappable during difficult times.

He is a regular contributor to Mint newspaper and has also appeared on business channels such as Bloomberg India TV and ET Now.

He is a man of few words but his low-key demeanor often underplays the fact that he is a good listener, a team player and a razor-sharp thinker.

I was glad to talk to Rajeev and get his expert views on equity mutual funds. 

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Sundaram Select Midcap Fund – A report

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Sundaram select midcap fund

(This report on Sundaram Select midcap fund originally appeared on the Unovest Blog.)

What’s the thing about midcaps?

Ask any seasoned investor and he would agree that the potential available with midcaps (as they grow and turn themselves bigger) could be huge. However, midcap stocks can be very volatile.

For those investors who would want the exposure to midcaps but not take the pain of looking at individual stocks, they can invest through midcap funds and make them a part of their long term portfolio.

Midcap funds would mimic the behaviour of midcap stocks as they ultimately invest in them. They can take you on a real topsy-turvy ride. Thus, it is important to select the right fund for your portfolio.

There are several midcap funds out there in the market. It sometimes becomes real difficult to pick one over the other.

Yes, performance is what you would look at but in my view one needs to go real deep – beyond just the performance numbers – and see which fund fits in his/her portfolio and financial goals.

We will make an attempt today with one of the funds.

In this report, we cover one of the oldest funds from the midcap space – Sundaram Select Midcap.

As mentioned, we will attempt to go beyond the performance and understand the fundamental nature of the fund and evaluate how well it has done with respect to its mandate – things that you should look at before making it a part of your portfolio.

Let’s get started.

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Building MF Portfolio – Avoid these 5 mistakes!

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MF Portfolio - Mistakes to avoid in mutual fund portfolio

This is my MF portfolio – am I right?

I often receive reader queries on the blog stating their choices of schemes that should be a part of their winning MF portfolio. They then want to know if it is alright or any change is required.

I recently received another one. As I said this is not the only one. There have been several such in the past. So, this reader had been investing in the following funds and now wanted a ‘second opinion‘ if these funds continued to make sense.

Here is the list of fund scheme names with their options.

  1. ICICI Prudential Export & Other Services Fund  – Dividend
  2. SBI Pharma Fund – Dividend
  3. UTI MNC Fund – Dividend
  4. ICICI Prudential Value Discovery Fund – Dividend
  5. UTI Transportation & Logistics Sector Fund – Dividend
  6. Canara Robeco Emerging Equities Regular – Dividend
  7. Reliance Small Cap Fund – Growth
  8. MOST Focused Mid cap 30 Fund – Growth
  9. Reliance Pharma Fund – Growth

The reader was concerned that his portfolio had a loss, that is, the current value of the investments was less than the amount he had invested.

He also made it amply clear that he was looking for ‘maximum returns‘. He mentioned that it was his hard earned money, which to me means that he does not want to take a lot of risk.

And you know what – his retirement is only 5 years away!

This is a perfect textbook example of how one can make all the mistakes in one go.  I believe we all have lessons to learn here.

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The curious case of Index Funds

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index funds

No one wants to buy index funds

The concept of Index funds has not worked in India, at least not so far. They are super hit in countries like the USA but not in India. Vanguard in the USA, the largest mutual fund company, has all its products as index funds.

Further read: Founder of Vanguard, John Bogle’s 8 Rules to build your mutual fund portfolio

Less than 1% of the overall investments in equity mutual funds in India are in index funds. That says it all.

The one word that would come to anybody’s mind who is picking mutual funds is ‘performance‘, which again, for index funds, is nothing to write home about.

There are several ‘other funds‘ that have delivered much better returns. And is that not what we want – more returns?

The ‘other funds‘ are the ‘actively managed‘ funds compared to the ‘passively managed‘ index funds.

Having said that, there are some key benefits of using index funds as a part of a long-term portfolio. Let’s explore them here.

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Equity Mutual Funds: Avoid these!

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worst equity mutual funds

Talk to any wise person and one learning that you are most likely to take away is that you should tread your path carefully.

And if you hear Charlie Munger, Warren Buffett’s best buddy and partner in Berkshire Hathaway; he puts it like this.

AVOID BIG MISTAKES.

Quite simple.

When it comes to investing, the rule stays the same.

When you are out there to build your portfolio of equity mutual funds, you may not be very lucky all the time to find the best performing funds. But what you can and should is that when you set out to pick your funds, ensure that you avoid the big mistakes.

How do you avoid the big mistakes?

Usually, investors select funds that have delivered the highest returns in the past. That’s the easy bait. But that also akin to entering DANGER ZONE, a sure-shot recipe for disaster.

The only point that should be noted in this regard is:

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