Wednesday, June 23, 2021
Sunday, November 24, 2019
Friday, October 4, 2019
Best Multi-cap Mutual Fund for long term | Top 5 best Multi Cap Fund.
Best Multi-cap Mutual Fund for long term | Top 5 best Multi Cap Fund.
Best Multi-cap Mutual Fund for long term | Top 5 best Multi Cap Fund.Parag Parikh Long Term Equity Fund Direct Growth
SBI Magnum MultiCap Fund Direct Growth
Kotak Standard Multicap Fund Direct Growth
Motilal Oswal Multicap 35 Fund Direct Growth
Aditya Birla Sun Life Equity Fund Direct Growth
Best Multi-cap Mutual Fund for long term
Top 5 best Multi Cap Fund.
How to choose best Multi cap Mutual Fund?
What is multi cap fund?
Risk associated with multi cap Mutual Fund.
Sunday, September 15, 2019
Best Large Cap Mutual Fund in India | Ideal for long term Investment | Investment Tips.
Best Large Cap Mutual Fund in India | Ideal for long term Investment | Investment Tips.
Best Large Cap Mutual Fund in India. What is Large-Cap Mutual Fund? How you will choose the best large -Cap Mutual Fund ? Mirae Asset large Cap fund Direct- Growth. Axis Bluechip Fund - Direct Plan – Growth Reliance Large Cap Fund - Direct Plan - Growth ICICI Prudential Bluechip Fund - Direct Plan - Growth SBI Blue Chip Fund - Direct Plan - Growth
How to Manage Risk of Mutual fund? Alpha, Beta, Standard Deviation, Sharp Ratio, Sortino Ratio.
How to Manage Risk of Mutual fund? Alpha, Beta, Standard Deviation, Sharp Ratio, Sortino Ratio.
How To Manage Risk in Mutual Fund
5 Ways to Measure Mutual Fund Risk
Standard Deviation
It Predicts the amount by which the return may go up and
down in correlation with average return or its means.
Standard deviation measures
the dispersion of
data from its mean. Basically, the more spread out the data, the greater the
difference is from the norm. In finance, standard deviation is applied to the
annual rate
of return of an investment to measure its volatility (risk). A
volatile stock would have a high standard deviation. With mutual funds, the
standard deviation tells us how much the return on a fund is deviating from
the expected
returns based on its historical performance.
R-squared
It shows the reliability of Beta.
R-squared values range from 0 to 100. According to
Morningstar, a mutual fund with an R-squared value between 85 and 100 has a
performance record that is closely correlated
to the index.
Beta
It Predicts performance of fund in correlation with
index.
Beta,
also known as the beta coefficient, is a measure of the volatility, or systematic risk,
of a security or a portfolio compared to the market as a whole. A beta of 1.0
indicates that the investment's price will move in lock-step with the market. A
beta of less than 1.0 indicates that the investment will be less volatile than
the market. Correspondingly, a beta of more than 1.0 indicates that the
investment's price will be more volatile than the market. For example, if a
fund portfolio's beta is 1.2, it is theoretically 20% more volatile than the
market.
Conservative investors who wish to preserve capital should
focus on securities and fund portfolios with low betas while investors willing
to take on more risk in search of higher returns should look for high beta
investments.
Alpha
It shows the return over the predicted return by Beta.
Alpha is
a measure of an investment's performance on a risk-adjusted basis. It takes the
volatility (price risk) of a security or
fund portfolio and compares its risk-adjusted performance to a benchmark index.
The excess return of the investment relative to the return of the benchmark
index is its alpha. Simply stated, alpha is often considered to represent the
value that a portfolio
manager adds or subtracts from a fund portfolio's return. An alpha
of 1.0 means the fund has outperformed its benchmark index by 1%.
Correspondingly, an alpha of -1.0 would indicate an under-performance of
1%. For investors, the higher the alpha the better.
Sharpe Ratio
Return generated per unit of Risk taken.
It is calculated by subtracting the risk-free rate of
return from the rate of return for an investment and dividing the
result by the investment's standard deviation of its return. The Sharpe
ratio tells investors whether an investment's returns are due to wise
investment decisions or the result of excess risk. This measurement is useful
because while one portfolio or security may generate higher returns than its
peers, it is only a good investment if those higher returns do not come with
too much additional risk. The greater an investment's
Sharpe ratio, the better its risk-adjusted performance.
Sortino Ratio
Similar to Sharp ratio.
Return generated per unit of Bad Risk taken.
Higher Sortino Ratio means fund is taking lower down
risk
CONCLUSION
Investments and risks will always go hand in hand, but if
you can use mutual funds well as an investment route, you can protect yourself
adequately from the many market risks.
Compare these ratios with same category of fund.
Don't select any fund by considering any ratio in
isolations.
‘There is no scientific way to choose tomorrow’s best funds today’, so one should review the current selection every quarter or half yearly.
How to Pick Best Mutual Fund in India? | 6 - Tips to select winning Mutual Fund.
How to Pick Best Mutual Fund in India? | 6 - Tips to select winning Mutual Fund.
6 Steps to Select Right Mutual Fund
- Investment Objective
Why we are investing? Define your Goal in terms of short
term and Long term.
Investment objective might be long term, short term or
linked to any event like kids marriage. Secondly, depending on investment
objective the risk factor can be decided.
2. Ratio analysis- Risk Management
Risk and return ratios like standard deviation, Sharpe ratio etc. I have discussed in my earlier article on Measuring Mutual funds risk. Along with those ratios, one also should check out the ALPHA of the fund. Alpha tells us what extra or less the fund manager has generated out of a given portfolio in comparison to benchmark.
In other words alpha is the performance ranking of the fund manager. You may check how often the fund manager has generated positive alpha in last few quarters and also keep a watch on its consistency going forward.
3. Consistent Performance and Ranking.
(Past Performance Is Not Indicative Of Future Results)
It is critical to check consistency in performance. For that
you should also check 5 year and 10 year returns of the scheme. It will help to
understand whether mutual fund scheme is fad or consistent performer. More
than the recent or long term performance of any scheme its ranking among peers
should be looked at. To find out the ranking you need to check out the quartile
ranking which will show how the fund has performed quarter on quarter among its
peer group. In quartile ranking each quartile comprises of 25 percent of peer
group schemes. So one may select the scheme which has remained in top quartile
most of the time.
4. Scheme asset size: Assets under management (AUM)
Less AUM in any scheme is very risky as you don’t know who
the investors are and what quantum of investments they have in this particular
scheme.
Too big asset size makes difficult for the fund manager to
generate the Alpha.
Accordingly you can check the asset size range…
For large cap 100 to 15000 Crores.
For small cap and Mid cap 100 to 5000 Crores.
For multi cap 100 to 10000 Crores.
For Debt fund 1000 to 20000 Crores.
5. Fund manager tenure and experience
Fund manager plays a very important role in the fund’s performance. Though it is a process oriented approach but still fund manager is the ultimate decision maker and his experience and view point counts a lot. You should know who is the fund manager of the scheme and what is his past track record.
You should also look at the performance of other funds which he is managing. If the fund manager of the scheme has recently been changed, don’t panic. Just keep a watch on his performance by looking at quarter to quarter performance.
6. Total expense ratio
Expense ratio is very important parameter to be looked at while selecting any mutual fund scheme. All fund management and distribution related expenses are borne by the scheme. This means high expense ratio will affect the fund’s returns.
Expense ratio is very important parameter to be looked at while selecting any mutual fund scheme. All fund management and distribution related expenses are borne by the scheme. This means high expense ratio will affect the fund’s returns.
Though mutual fund’s total expense ratio has been capped by SEBI, still lower the better unless we get some extraordinary return by paying higher expenses for fund management.
Normally schemes with expense ratio of upto 1.5% are
considered OK as per industry experts.
Rule No 1
You should limit their investments to just one scheme from each major equity mutual fund category. For example, one largecap, one multicap, two midcap or smallcap schemes. He believes that two schemes from mid and smallcap categories would be a good idea as it help investors own all good stock in the segment. Do not choose more than two funds from one category. Owning too many schemes, even if they are great performers, from the same category would not help to diversify or maximize returns. Mostly you would be just replicating your investments as there may be overlapping of portfolios of these funds.
Rule No 2
Choose Right and Sit Tight.
You should limit their investments to just one scheme from each major equity mutual fund category. For example, one largecap, one multicap, two midcap or smallcap schemes. He believes that two schemes from mid and smallcap categories would be a good idea as it help investors own all good stock in the segment. Do not choose more than two funds from one category. Owning too many schemes, even if they are great performers, from the same category would not help to diversify or maximize returns. Mostly you would be just replicating your investments as there may be overlapping of portfolios of these funds.
Rule No 2
Choose Right and Sit Tight.
Don’t panic when market is down or you may add small
quantity as lumpsum in you existing SIP.
4 Golden rules to remember
Rule No 1
You should limit their investments to just one scheme from each major equity mutual fund category. For example, one largecap, one multicap, two midcap or smallcap schemes. He believes that two schemes from mid and smallcap categories would be a good idea as it help investors own all good stock in the segment. Do not choose more than two funds from one category. Owning too many schemes, even if they are great performers, from the same category would not help to diversify or maximize returns. Mostly you would be just replicating your investments as there may be overlapping of portfolios of these funds.
Rule No 2
Choose Right and Sit Tight.
You should limit their investments to just one scheme from each major equity mutual fund category. For example, one largecap, one multicap, two midcap or smallcap schemes. He believes that two schemes from mid and smallcap categories would be a good idea as it help investors own all good stock in the segment. Do not choose more than two funds from one category. Owning too many schemes, even if they are great performers, from the same category would not help to diversify or maximize returns. Mostly you would be just replicating your investments as there may be overlapping of portfolios of these funds.
Rule No 2
Choose Right and Sit Tight.
Don’t panic when market is down or you may add small
quantity as lumpsum in you existing SIP.
Rule No 3
You should stay away from sector funds. A retail investor
should stay away from sector funds, no matter how well they are doing.
Rule No 4
Do not add funds that do not match your risk profile. Most mutual fund investors have an affinity towards top-performing schemes. Without bothering to check details, investors simply add top-performing schemes to their portfolio. This is a big mistake. A conservative investor would find the best performing mid or smallcap fund too hot to handle during a prolonged bear phase in the market. The scheme may be brilliant, but it simply doesn’t make sense to own it if it doesn’t match your profile.
Rule No 4
Do not add funds that do not match your risk profile. Most mutual fund investors have an affinity towards top-performing schemes. Without bothering to check details, investors simply add top-performing schemes to their portfolio. This is a big mistake. A conservative investor would find the best performing mid or smallcap fund too hot to handle during a prolonged bear phase in the market. The scheme may be brilliant, but it simply doesn’t make sense to own it if it doesn’t match your profile.
Finally, always focus on your goals, investment horizon and
risk profile while choosing a scheme.
Exit of any big investor out of any mutual fund may impact
its overall performance very badly and the remaining investors in a scheme will
have to bear the impact. In schemes with larger AUMs this risk gets
minimized.
A good fund manager will automatically result in better performance and thus improve the quartile ranking and would also generate good alpha.
High scheme assets will help in reducing the total expense ratio of the scheme. But, as the popular saying goes- ‘There is no scientific way to choose tomorrow’s best funds today’, so one should review the current selection every quarter or half yearly.
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