Best advise ever received for mutual fund

I answered this question on Quora


I have received many great advises thanks to one of blogs Subramoney and have benefited immensely from same. Some of them which I can remember are as follows.
  1. You only need 2–3 funds from good fund houses without need to constantly check their performance.
  2. Fund manager is more important than the Mutual Fund itself for delivering consistent returns.
  3. Fund Management cost has big impact on your overall returns, even a difference of 0.5 percent of FMC charges can shave off lakhs of rupees from your final returns due to inherent nature of compounding.
  4. Starting early is key to financial freedom.
  5. Don’t sell your fund just because it has few bad years, the fund manager might be having a contrarian view and he may be doing something different. For example HDFC Top 200 had some bad years, but it has now become one of the best funds again.
  6. Investing very less amount in Mutual Funds SIP compared to your income, is not going to make you wealthy. Many people invest just 2000 on SIP even if they could have easily done SIP of say rs 15,000.
  7. When you invest in equities, you invest in underlying business, and the business borrows at market rate of say 8–10% and in order to make profit, it has to generate much higher returns of 15–20% and this is the return you can expect from a good business.

Comments

Post a Comment

Popular posts from this blog

What rolling returns tell us about a Mutual Fund performance

Image
Most of the Mutual Fund rating websites list the past return as on today. It helps to gauge how fund have performed in past as of today, but doesn't  tell how fund has performed if the returns were calculated in past date. For example 3-year return for a fund may be 20% today, but what about 3-year returns of the same fund in past years. This is where concept of rolling returns come into play and is more effective tool, to determine the consistency of a fund in delivering good returns year after year. I wish mutual fund website could incorporate this feature and also rate the funds accordingly. Lets try an example using HDFC TOP 200 fund which has history of more than 20 years and it would be interesting to know, how the fund has performed in past based on rolling returns. I have calculated rolling returns of the fund , for 3-year, 5-year, 7-year, 10-year and 15-year period based on NAV on 1st of march. Over a 3 year period returns are unpredictable and therefore its go
Read more

Top 5 equity mutual funds in each category with consistent returns

Image
In my earlier post I laid down some rules to evaluate Large Cap funds http://moneybhasa.blogspot.in/2017/02/top-5-large-cap-mutual-funds-with.html In this post I will evaluate all equity mutual funds in different categories in a single post Large cap  Muti cap Mid/small cap Tax planning ELSS funds  The criteria remains same and reproducing it below. The fund should have at least 10 years of history. The data from value research is used which lists returns over 1-year, 3-year, 5-year and 10-year periods. The  returns are as on date 24-Feb-2017. The weighed average return is calculated by assigning following weights based on duration of returns. Annual compounded returns are taken into consideration. For 10 year returns weight is  40 out of 100 For 5 year returns weight    is  30 out of  100 For 3 year returns weight    is  20 out of 100 For 1 year returns weight    is  10 out of 100 Hence formula for weighed average returns Weighed Average returns =  (40*
Read more

Top 5 Large cap Mutual Funds with consistent returns

Image
The idea of this  post is to select and rank large cap funds based on consistent return over long period of time. Selecting funds pose a real challenge as the number of funds in each category keeps on increasing. Also over different period of time there is huge variation in  returns for Mutual Funds. For example a fund with great 1 year or 3 year returns may not perform good over a 5 year or 10 year period . Therefore I laid down some criteria  to pick the fund taking into consideration returns for all possible periods from 1 year to 10 year, with higher weight for long term returns. This way we can filter signal from the noise and also overcome our inherent biases. The criteria and methodology is listed below. The fund should have at least 10 years of history. The data from value research is used which lists returns over 1-year, 3-year, 5-year and 10-year periods. The  returns are as on date 24-Feb-2017. The weighed average return is calculated by assigning following weight
Read more