Want to invest in mutual funds but don't know how to go about it?
Get all your mutual fund related queries answered by our expert, Manoj Nagpal, managing director and chief executive officer, Outlook Asia Capital.
Q) P Kaliswamy writes to us from Tamil Nadu. Investments in Reliance Small Cap Fund Growth and ICICI Prudential Bluechip Fund Direct growth. Want to know the growth of Tata Digital India Fund Growth and Axis Focused 25 Fund Growth?
ICICI Bluechip Fund is one of the best choices for a large cap fund. Managed by S. Naren, with assets of almost Rs 20,000 crore, this fund navigates the markets with low volatility with a conservative and stable approach. Reliance Small Cap Fund is among the better managed small cap funds with assets close to Rs 7,000 crore. Your choice of using a SIP in small cap and a lumpsum in large cap makes sense. Ideally, you should avoid sectoral funds like Tata Digital, as sectoral funds are usually higher risk as you reduce diversification. Though, Tata Digital has done well in the past, your criteria should not be past returns. AXIS Focused 25 is a concentrated portfolio and has shown higher volatility. Again, the last year performance is good, but the higher volatility makes it a high risk choice. I would suggest that you evaluate the Motilal Multicap 35 as a better long term choice.
Q) Vijayakrishnan C writes to us from Tamil Nadu. He has SIP of Rs 6,000 in Reliance Tax Saving MF -growth option fund for last two years. Now, the net asset value (NAV) is below the amount invested. Please advise whether to continue or exit?
Reliance Tax Saving has a portfolio composition equally weighted to midcaps and large caps. So, it has a higher midcap allocation than other funds. The other factor is that the portfolio is weighted towards cyclicals. These two reasons have made it a underperformer in the short term. However, we believe that if you are a long-term investor, you should not stop the SIP and continue as it is a short-term underpeformance and it will get corrected, when the cyclical rally starts – though it seems it may take some time.
Q) Anil Khetarpal writes to us on Facebook. Which fund is better HDFC Small Cap Fund or L&T Emerging Businesses Fund?
We like the HDFC Small cap fund better than L&T Emerging Business Fund. However, both the funds have their unique characteristics. The positives for HDFC Small Cap Fund is that the stock selection and portfolio sizing is good. L&T Emerging business has a focus on manufacturing sectors and despite that it performs well. So, if you have to select one of the two, then HDFC Small Cap will be our choice due to it’s astute fund manager Chirag Setalvad.
Q) Rajesh Shahi wants a view on Kotak Select Focus Fund Direct Growth and Axis Multi Cap Fund Direct Growth having SIP of Rs 1,000 each. Should I look for one large cap. Time horizon is 15 years.
If you have a long term view, ideally you should choose multicap funds as it has a good mix of both large and midcaps. Usually, a large cap fund should be used for 5-7 year horizon due to it’s lower volatility. But since you are doing a SIP, a higher volatility fund is actually more suited. Axis Multicap Fund is recently launched, with a history of less than one year, hence we don’t know how it will navigate these markets. But in the short term, it has been a good performer.
Q) Jatin Agarwal wants a view on Motilal Oswal Multicap 35 Fund and L&T Midcap Fund via SIP (Rs 5,000 each). I am looking to invest for 40 more years. Can you suggest some other funds for further investment (Two funds for Rs 5,000 each via SIP)
Wow, this is the first time I have seen a young person talking about a real horizon of 40 years. The crux is to be committed to the long term and make volatility your friend. I would suggest that diversify your portfolio. Your current two funds have a growth approach and hence ideally you should add a fund with core proposition of having a distinct investment style than the current two funds. I would suggest use the DSP BR MidCap Fund or the Sundaram MidCap Fund as both these funds will complement your current fund selection.
Q) Soumya Mukherji is opting for monthly dividend payout option in ICICI Prudential Debt and Equity Balanced Fund a bad option if I plan to stay invested for 7-8 years?
Monthly dividend option is usually not very well suited option to look for from such funds as these funds are not constructed to give monthly dividends. Though lot of funds do get sold on this premise, but in our view that’s not good for the investor. If you are looking for a monthly flows, you could choose a fund which ideally should not have an allocation of more than 15-35 percent in equities and there too choose a SWP (Systematic Withdrawal Plan) as it will more tax efficient and give you more certainty of flows. You could choose the Kotak Equity Savings Fund, if you are okay with the lower allocation of equity.
Q) Padmanabha Linganna has invested Rs 3,000 in Mirae Asset Emerging Business Fund and Rs 3,000 in L&T Emerging Business Fund and Rs 4,000 in Aditya Birla Sun Life Small & Midcap Fund. If I continue with these funds in five years, can I get Rs 10 lakh?
You have a high risk portfolio constructed here. Your target return has to be around 25 percent, if you want to achieve your goal. In my limited view, that is too aggressive target and there is a high probability you will miss it. If you can add another Rs 3,000 per month in the SIPs, then that would enable you to achieve it reasonably well. You can split it across the three funds or add a mulit-cap fund to reduce the risk too.
Q) Tejaswi Gokul wants a view on Axis Long Term Equity Fund Growth for three year lock-in period?
Axis Long Term Equity is the largest tax saving fund with assets of almost Rs 1,9000 crore. Managed by Jinesh Gopani, the fund has navigated the markets efficiently and has an approach, which is a bit contrarian. Such a approach usually pays off in the long term and the reason I emphasise on this is that if your horizon is more than five years plus , then you should consider this fund and that is true of any equity investment more so here.
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