The year 2014 surprised the investors on a positive side and delivered exceptional returns. The investors made huge gain in equity and debt investments at the same time, which is an uncommon phenomenon. After a long period of low returns and uncertainty, the SIP investments showed their true potential and investors saw their monthly investments grow to considerable sum, both due to regular accumulation and also due to rise in the markets.
After such a phenomenal period, few questions that become too common are, “Are the markets over valued? Should we invest now? Or should we wait for the market to correct? Which are the best mutual funds to invest now?”
The answer lies strictly in the objective of the investor. If the investor is looking for investing his money for a short duration of 1-3 years, he should stick with short or medium term debt funds for safe and moderate returns.
On the other hand, if the investor is looking to grow his wealth, he should have time horizon of at least 5 years for his investment. He should be looking to invest his money in a portfolio of quality diversified equity funds through systematic (SIP) mode.
We list here ten equity oriented diversified mutual funds that shall create significant wealth for investors in the times to come. The schemes have been extensively researched and identified on the basis of various qualitative and quantitative parameters.
Few of the considerations we have made while choosing the funds are:
a. Consistency in performance in both down market and up market cycles.
b. Past performance of the scheme viz. a viz. its peer group
c. Past experience of the fund managers managing these schemes and the areas where they have delivered the most.
d. Investment philosophy of the scheme-Schemes with different investment philosophies have been chosen to have a diversified group
e. Asset size of the scheme-Since SIP investments run long, it is a conscious decision to select schemes where AUM size is not high and where expansion of AUM is possible without hampering the investment philosophy or the performance.
f. No two schemes have been chosen from the same fund house. Though we could not resist ourselves and did include two schemes of Mirae Asset AMC.
g. We have tried to create a diversified group by having different kind of funds: Large cap, large and mid cap, mid cap, mid n small cap and balanced funds in this portfolio.
1. Axis Midcap Fund
Fund Manager-Pankaj Murarka(4 years)
Among the top midcap funds, this fund focuses on companies that have exceptional growth rate of 20-25% and are expected to become large caps. To mitigate risk, it invests in larger size midcaps. It also keeps sizeable exposure in small cap companies.
2. Mirae Asset Emerging Bluechip Fund
Fund Manager-Neelesh Surana(4+ years)
A star performer in midcap category since its inception in 2010, this fund primarily invests in companies with positive cash flows of more than 100 crores and proven track record. With bottom up approach, it focuses on scalable businesses that can deliver long-term growth.
3. Religare Invesco Mid n Small Cap Fund
Fund Manager: Vinay Paharia(6+ years)
One of the most consistent Midcap performers, this fund seek to invest in companies with established tracked record through a bottom up approach. It focuses primarily on growth stocks after filtering them on quantitative parameters like Return on Capital over 15% being a minimum bar.
4. UTI Midcap Fund
Fund Manager-Anoop Bhaskar(7+ years)
With a seasoned fund manager at the helm, this fund invests in small cap companies as well making it a mid n small cap fund. A consistent performer, it focuses on companies with proven track record and future growth potential. The number of stocks in the portfolio is higher than the industry average to manage portfolio risk.
5. Kotak Select Focus Fund
Fund Manager-Harsh Upadhyaya(2+ years)
Primarily investing in large companies with approx. 30% allocation to midcap stocks, it follows value based investing philosophy. With the change in fund manager in 2012, it has shown considerable improvement in its performance. A fund to watch out for in large and midcap category.
6. BNP Paribas Equity Fund
Fund Manager-Shreyash Devalker(3 years)
Consistent benchmark beater, this large cap oriented fund takes limited exposure to mid and small cap companies. Under the management of current fund manager, this fund has shown consistent performance. Investors looking for attractive returnswith lesser volatility may consider this fund.
7. Mirae Asset India Opportunities Fund
Fund Manager-Neelesh Surana(6+ years)
Another star performer from Mirae Asset fund house, this fund has been beating the benchmark consistently over last 6 years of its existence. The fund focuses on quality companies with growth potential available at reasonable price. The fund doesn’t deviate too much from sectorial allocation of the benchmark but invests in mid and small size companies as well to generate superior risk adjusted returns.
8. Birla Sun Life MNC Fund
Fund Manager-Ajay Garg(5+ years)
This is a unique fund(UTI MNC Fund is another such fund) which invests primarily in MNC companies operating in India. With developed brands and business models, these companies offer attractive growth potential at considerably moderate risks. Though the investment is predominantly into midcap stocks, the risk associated with such companies is generally similar, or even lower than many large cap stocks. This fund deserves to be a part of any investor’s portfolio for attractive returns with moderate volatility.
9. ICICI Prudential Mid Cap Fund
Fund Manager-Yogesh Bhatt(2+ years)
One of the finest midcap funds, its uniqueness lies in following Price to Book Value(P/B) ratio of the market to adjust its debt:equity allocation which may range from 65-80% for equity and 20-35% for debt. What it means is that it reduces its equity exposure when the markets are high and increases it when the markets are low. Its equity investments are also fairly mixed with exposure to both large and midcap stocks.
10. HDFC Balanced Fund
Fund Manager-Chirag Setalvad(7+ years)
This fund has delivered superb value to its investors and has beaten even pure equity funds in performance over 5/7/10 year period. An aggressive performer, it invests its equity portion considerably in midcap stocks and rebalances the gains often to manage risk. This investment style has served well for the fund and is expected to do the same in future.
Scheme Performance for Systematic Investments(SIP)
|S.No.||Scheme Name||Category||Compounded Annual Returns(%) for SIP|
|2 yrs||3 yrs||5 yrs||7 yrs||10 yrs|
|1.||BNP Paribas Equity Fund||Large cap||42.72||33.77||22.68||18.97||16.08|
|2.||Kotak Select Focus Fund||Large & Midcap||52.40||39.41||24.76||–||–|
|3.||Mirae Asset India Opportunities Fund||Large & Midcap||48.95||37.51||24.50||–||–|
|4.||BSL MNC Fund||Midcap||64.64||46.59||31.30||29.57||23.81|
|5.||Axis Midcap Fund||Midcap||64.82||48.51||–||–||–|
|6.||Mirae Asset Emerging Bluechip Fund||Midcap||71.14||52.02||–||–||–|
|7.||Religare Invesco Mid n Small Cap Fund||Mid & Small cap||66.01||49.10||31.65||–||–|
|8.||UTI Midcap Fund||Midcap||80.06||56.22||33.49||28.96||21.79|
|9.||HDFC Balanced Fund||Balanced Fund||46.76||34.54||23.46||22.35||19.24|
|10.||ICICI Prudential Mid Cap Fund||Balanced Fund||41.99||33.32||23.46||20.54||16.92|
Investors looking to create wealth over long term should consider investing in 3-4 different types of schemes for a well diversified, balanced and consistently performing portfolio.