Money Matters

I hold   ICICI Prudential Top 100 Fund in my portfolio and according to Valuersearch its a 3 star rated fund in muti-cap category.  Also  according to valueresearch, the fund is  ranked low compared to other mutual funds in multi-cap category. The 3 year returns for the fund is 16.94% while average returns for the category is 19.79% Similarly  the fund returns are below the category average for 5 year and 10 Year period. My first reaction was to sell it off and buy a good large cap fund instead.  On doing some more analysis I found that    ICICI Prudential Top 100  is in fact a large cap fund and valueresearch for some reason labels it as multi-cap. As a consequence the returns for this fund appear low compared to multi-cap funds and gets low rating which is not correct.  The fund description in ICICI mutual fund website clearly mention that this a large cap fund. https://www.icicipruamc.com/icici-pruden...

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...

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 assigni...

I answered the question on Quora . There are many factors, some of them I can list down based on personal experience. Indians invest majority of income on house and gold and that leaves them little to invest in other avenues. Financial education has not yet caught up to educated people of our country. There are many  among us who are unaware of the fact that  Long Term Capital Gains from equity mutual funds are tax free. There are many misconceptions regarding equity investments, for example trading in shares and investing in shares is considered as same thing . I would also partly blame the Investment agents (Banks, LIC, Insurance), often giving wrong advice to customers. Insurance is mixed with investments which are separate things. Everyone wants to get rich quickly so the time horizon for investment is very less. Over a short period of time Mutual Funds or Equities deliver unpredictable returns, but people often overlook the power of compounding over large period...

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. You only need 2–3 funds from good fund houses without need to constantly check their performance. Fund manager is more important than the Mutual Fund itself for delivering consistent returns. 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. Starting early is key to financial freedom. 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. Investing very less amount in Mutual Funds SIP compared to your income, is not going to make you wealth...