mutual fund

The 32 fund portfolio – Diversification vs Diworsification

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Mutual Fund Diversification or Diworsification

How many funds do you have in your portfolio?

“I will have to count.”

After 10 minutes.

“It is 32 funds.”

Did you say 32?

“Yes.”

What are these many schemes doing in your portfolio?

“Diversification.” It was mentioned as a matter-of-fact. 

What does having 32 Mutual Funds in your portfolio mean?

Let’s understand this in two parts.

Part 1: It means a lot.

You believed in the theory that about 25 to 30 stocks make a good diversified portfolio and hence that would be true for mutual funds as well.

You believed that diversification is the best bet against ignorance or so said the Oracle of Omaha  – you don’t exactly know the right fund to invest in and hence accumulate many – at least some will perform.

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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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Investing in Debt Funds – an insider’s perspective

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Investing in Debt Funds - An insider's perspective

I believe debt funds can play an important role in an investment portfolio. I just don’t know what and how. That’s where I reached out to Akhil Mittal, Senior Fund Manager – Fixed Income with Tata Mutual Fund. He is the expert and he was kind enough to share his views and help me learn more about debt funds.

Just to let you know, Akhil manages the following debt fund schemes at Tata MF.

  • Tata Dynamic Bond Fund
  • Tata Short Term Bond Fund
  • Tata Income Fund
  • Tata Income plus Fund
  • Tata Gilt Securities Fund
  • Tata Gilt Short Maturity Fund
  • Tata Gilt Mod Term Fund
  • Tata Floater Fund

He also manages debt portion of some hybrid funds (Tata Balanced Fund, Tata Young Citizens Fund, Tata Regular Savings Equity Fund, Tata Retirement Saving Fund – Moderate & Conservative Options, Tata MIP Plus Fund, Tata Young Citizens Fund and a few FMP’s for Tata Mutual Fund.

Here we go.

VK: Hi Akhil, this is going to be unlike any other conversation that you might have had before.

You are a debt fund manager, the specialist. I come to you as a layman to understand debt funds and how can I use them best. I have questions, which I want to ask you and get clarity about investing in debt funds. Can I?

AM: Sure, please go ahead.

VK: OK. Here’s the first and the obvious one. What role can a debt fund play in my portfolio, any investor’s portfolio?

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Mutual funds have a new CV

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Mutual Fund CV factsheet

Year ago, when I started out as a newbie investor, I called up my friend who was working with one of the largest and most respected mutual funds in town then. Of course, he knew a thing or two about mutual funds.

“Tell me which fund to invest in. I want to do some tax saving.”

He told me 1 ELSS or tax saving fund and I invested. That was the beginning of my relationship with mutual funds.

I didn’t care to understand any further about my prospective investment. A trusted friend had recommended them, that was enough. Why would I bother?

For a couple of years, I continued to rely on his advice until, I myself started to work with a financial advisory company.

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New Investor: Beware of Direct plans

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direct plans are not for new investors

“Are direct plans all that beneficial?” was a twitter headline I read this morning and I was stumped.

To me:

This summarises all that is wrong about the understanding about the direct plans of mutual funds.

The popular media and some advisors too has also not been able to hold its horses and has given out interpretations and views that show the direct plans in not so good light. So much so that it has been declared that new investors should not invest in direct plans.

Now, the investor is left utterly confused. In this post, I will try and bring out the facts and help you, the investor, to make the right decisions about direct plans.

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John Bogle’s 8 Rules to build your mutual fund portfolio

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John Bogles 8 rules to build a mutual fund portfolio

Who is John Bogle?

Back in 1975, the world’s first index mutual fund was started with the guiding principle of “trusteeship”. It sought to put the investor first and tilt the scales of investment rewards towards the investor. Not just that, this organisation has established the norms of running a trusteeship driven organisation.

The fund house, as would be a familiar name to you, is known as Vanguard. As of today, Vanguard is the largest no-load mutual fund in the world managing trillions of dollars for its unit holders.

I want to bring your focus on this man who built Vanguard, its founder John C. Bogle.

John Bogle has studied mutual funds in-depth since 1949, when he began his senior thesis at Princeton University before joining the industry in 1951. He was named as one of America’s four financial “giants of the twentieth century” by Fortune magazine.

He is a prolific author and has penned his wisdom on investing in books such as Common Sense on Mutual Funds – New Imperatives for the Intelligent Investor.

Mr Bogle is a hard-core believer in indexing or buying index funds. In his findings (supported by data), a broad market index fund will almost always beat an actively managed fund. This will primarily be a function of the costs that are loaded onto actively managed funds. He outlines his approach very logically in his book Common Sense on Mutual Funds.

However, for those who would still go the other way and choose actively managed funds, he has shared 8 rules to build a mutual fund portfolio. These rules are based on the same strategies that help index funds to succeed.

While the rules have been explained in great detail in his book Common Sense on Mutual Funds, in this post I bring to you the essence of these 8 rules.

While the context of these rules is in the US, I believe they would apply to any sensible investor building a portfolio to meet long-term financial goals.

All the 8 rules are listed below. To read a detailed explanation as also the India mutual fund context, you may want to download the full guide.

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