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Creating a mutual fund portfolio involves several steps which many investors believe are
too complex. To begin with, an investor needs to shortlist a few schemes with credible
long-term performance record. The next step is to pick the ones that are in line with the
risk profile and investment objectives. Another crucial step is to fix the composition of the
portfolio. The task doesn't end here. Another equally important step is to monitor and
review the performance of the portfolio at regular intervals.
ET.com Mutual Funds is here to help you. We have been recommending equity mutual
fund portfolios for SIPs every month since October 2016. The portfolios have been
created for three different individual risk profiles: conservative, moderate and aggressive.
We have also considered three SIP baskets - between Rs 2,000-5,000, between Rs
Big Change:
5,000-10,000 and above Rs 10,000 - while creating the portfolio. The end of Five-Year Plans: All you need to know
We monitor the portfiolio on a regular basis and recommend the required changes whenever we think is necessary. We are happy to tell
you that there is no change in the portfolio this month. You can see the SIP portfolios below.
We have only considered equity diversified and equity-oriented balanced funds for recommendation. We have also assumed that the
investor is investing with an investment horizon of five years.
Keep looking for our monthly review of the portfolio in the first week of every month.
Methodology
ET.com Mutual Funds has employed the following parameters for shortlisting the mutual fund schemes.
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1. Mean rolling returns : rolled daily for the last three years.
2. Consistency in the last three years : The three-year period is divided into smaller time periods each with a progressing weighting.
3. Downside risk : We have considered only the negative returns given by the mutual fund scheme for this.
X =Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z 4. Outperformance : It is measured by Jensen's Alpha for the last three years. Jensen's Alpha shows
the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing
Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.
Average returns generated by the MF Scheme - [Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free
Rate}
5. Asset size : For equity diversified funds, the threshold asset size is Rs 100 crore, and Rs 50 crore for balanced funds.
We have also conducted a back testing of our model portfolios. These returns are forward returns from the base date.
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Moneycontrol News
The stock market has remained at high levels for a while, with the BSE Sensex consistently ruling above the 31,000 mark. While
stock valuations rising, so are risks.
If you are looking for exposure to equities at these levels, one of the best ways is to adopt the mutual fund route since stock
selection is done by experts on your behalf.
However, even fund selection can be a tough choice if you are looking to invest in mutual funds for the first time. You might be
wondering whether these high market levels is a good time to start, and if so, which are the funds that could give good returns
from here on?
Investment experts say if one has a long-term view, any time is a good time to start invest or increase ones holdings. A
first-time investor or for that matter, any investor, should not be concerned about the stock market levels if he or she is looking to
invest for the long term. Volatility is a short-term concept and it is inevitable when we visualise markets over short time periods in
the hindsight, in the present or predict in the future, Vikash Agarwal, Co-Founder, CAGRfunds, told Moneycontrol.
Agarwal first time investor should choose his or her funds based on the objective for investing, risk profile and time horizon.
Assuming that such an investor is investing for the long term (> 5 years), has moderate risk appetite and wants to build
wealth, he should start by investing in a Balanced Mutual Fund, he said.
Agarwal the SIP route for investment. Market levels do influence mode of investing. Sometimes people tend to time the
market and feel that they should invest a lump-sum when markets have fallen to a level from where they are likely to rise. While
this hypothesis can be true in some cases, for a first-time investor, it is unlikely that he will be able to find the time and expertise
required to conduct such analysis. Attempt to time the market will most likely be inconsistent and sub optimal. Hence, a first-time
investor should adopt a SIP route to invest.
Agarwal suggests the following 5 funds for first-time investors at current levels:
Balanced funds:
Large-cap funds:
Multi-cap Fund
S Sridharan, Head, Financial Planning, Wealth Ladder Investment Advisors said investors should identify their objective, time-
horizon and their risk appetite to choose the right fund. For example, if the money is needed in 3 years of time, one should
avoid investing in equity-based funds. They should look at only debt-based mutual funds. The investment is not always to get a
higher return, it is to be available at the time when you need it.
The selection of funds should be based on both quantitative and qualitative parameter. The qualitative parameters are like the
sponsors of the AMC, fund managers experience, investment philosophy and process, investment objective and style. On the
other side, we also have to look at the quantitative parameters like the past performance, risk adjusted return, performance
against the volatile market and expense ratio, Sridharan said.
He said young investors should have a long investment horizon. If you are a young investor you would like to stay invested
for more than 7 years. It is ideal to invest in an asset allocation of 70:30 where 70% can be invested in equity and 30% can be
invested in debt. It is ideal to invest in a well-established large-cap mutual fund at this juncture.
Asset
Schemes Category 1 year 3 year 5 year
Class
DHFL Pramerica
Equity Large cap 13.07% 11.09% 16.14%
Large cap
ICICI Pru Focused
Equity Large cap 16.7% 11.99% 17.43%
Bluechip
SBI Bluechip Equity Large cap 12.75% 14.55% 19.56%
HDFC Medium Term Debt Medium 9.00% 9.68% 9.47%
Opportunities Term
Income
Birla SL Treasury
Debt Income 8.62% 10.28% 10.14%
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