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Mutual fund returns in the past 1 year has confused many newbies. You should not invest in
Mutual Funds in the below scenarios -
1. If you are expecting returns of 25–40% each year for next 5–10 years. Then sorry
man!!You are at the wrong place.
2. If you need to make a quick buck & expect double digit returns in few weeks or
months. Mutual fund is a no no for you.
3. If you can’t stay patient & can’t keep pumping in the money every month for an
investment horizon of more than 5 years. Stay Away!!
4. If you are a short term trader & expect the same returns. Please stay away!!
I can only find the above 4 reasons to not invest. If you ask me, i can give you 100 reasons why
to invest & what you will be missing out by not investing. Follow - Mutual Funds Wiki to
understand the secret of being a successful mutual fund investor.
What are the top 5 tax saving options for investment with more than 15% annual returns?
Here is the snapshot of the best ELSS funds based on 1, 3 & 5 year returns -
Ensure you invest for long term & not just consider 3 year lock in as your investment
period. Read more about the best performing mutual funds - Best Mutual Funds to invest
in 2018
Which funds would you suggest if I want to invest 5k for 3–5 yrs and 1K for 30 years
monthly on SIP?
I would recommend a balanced portfolio for 5 years investment horizon if your risk appetite
is medium.
The qualities of the balanced portfolio that make it a suitable option for 5 year investment are:
The qualities that make the mid and small cap portfolio a suitable option are:
Investments are made in small size companies and they have the potential to grow
much faster.
They are fast and nimble: Quick decision making and better ability to adapt to
changing markets
Historically, gives higher returns with higher volatility
The portfolio returns goes up to 15%
Also for Rs 1,000 SIP for 30 years, you can invest in a Diversified Portfolio.
The qualities that make the diversified equity portfolio the best are:
Right mix of Large & Small cap firms balancing growth & returns
Curated Portfolio of Funds selected by an advisory team
Funds with best track record and future potential
The portfolio returns goes up to 12%
Hope this answers your question. Happy Investing!
For 3–5 years, i would suggest you to go for best performing large cap funds with 1/4th
allocation to debt funds or you could include balanced funds as well. However, if you had
increased your time frame to 5–10 years - you could go for mix of large cap & mid/small cap
funds. For 30 years, i would suggest you to go for a small cap fund. Your time frame is enough
for this investment to be risk free.
Hello I have 40k INR as saving. Suggest me some good equity tool for investment? I have high
risk profile. My age is just 24 and I want be long term investor
Wonderful!!You have all the traits to be a successful investor, since you have chosen to invest
for long-term.
Since you have a high risk profile, i would suggest you to go for pure equity & balanced mutual
funds in the ratio 80:20. In the pure equity category, you could choose best performing small
caps. To understand more on the different categories - Equity mutual fund categories for your
portfolio
Next step - Don't invest everything lumpsum - allocate an amount monthly & pump in the
money into your schemes. SIP definitely has an advantage over lumpsum. SIP - The magical
recipe for financial success
Next step - Choose your mutual funds wisely, keep an open eye & evaluate annualy on the
returns and compare it against the peers!! Best Mutual Funds to invest in 2018
Final step - Be Patient!! Make sure your initial though of long term investment stays as is!!
Don't panic when the markets are volatile & keep pumping in the money through SIP.
Let me show you the advantage of long term investment. This is the return you can get when
you invest 10k monthly for 15,20 or 25 years considering 16% return rate for aggresive
schemes.
Yes that is the biggest mistake. Everyday when you are stuck in traffic - just try to recall the
hurry that everyone is in. We never see such behaviour in countries abroad. No there is
definitely no relation between traffic & investments!!
But we Indians are not taught the art of being patient. We are always in a hurry, but always
late!! Same reflects in our investment profiles. 'Ohh God!!My stocks are down 10% - i'm selling
them!!'. What if warren buffet had done the same during crash of 1987 or 2008?
The second biggest mistake Indians make is 'Do what my neighbour is doing'. My friend
invested in XYZ fund - so i'm pumping all my wealth since he said it can generate 100% in an
year.
I wish during our schooling, we had few subjects which teach us to be relevant, specially
personal finance & investments. But infortunately, we are only tought how to earn money &
not how to use it wisely.
1. The very basic things I look for in stock : The first basic requirement is the product /
service provided by the company. And does it have a future? Carbon black is a raw
material used in various industries, unless you can find a way to make tires without it,
this industry is going to thrive.
2. Demand/Supply Ratio : Is the product in demand, is the demand rising over the years,
are there an new players entering, if they enter how easy is for them to capture the
market?
3. The fundamentals - Number game : When points 1,2 are okay, I look at fundamentals,
and then decide at what levels I am ready to buy the stock for. And how much of my
portfolio (Money) I am going to invest.
Dust is now settling after Demonetization & GST implementation. You can see the signs of that
while analyzing Q2 FY18 results of different companies. Demand is slowly picking up. Rather than
investing in a single stock, go for a mix of 5 stocks from five different sectors which will be under
limelight for 2018. The five different sectors which would be under focus in 2018 will be
Infrastructure - Due to govt push for housing for all, Bharatmala projects, infrastructure
development will see lot of opportunities in India
Auto/Auto Ancillaries - India is far behind, in terms of infrastructure, and with growing focus on
it, the commercial vehicle has a massive growth coming up in the long term. Growing middle class
& upper middle class will add more demand towards passenger vehicle segment. Indian automotive
industry has a long way to go.
Chemicals & Fertilizers - China's decline in specialty chemicals business due to environmental
regulations to benefit India. Rural theme is picking up in India and expectation of good farmer
oriented schemes in the upcoming budget will give focus to this sector
Logistics - Government’s move to give infrastructure status for this sector is going to help. When
infrastructure is given more focus during this year logistics is a key beneficiary of that.
Hospitality - Indian hospitality industry is gradually picking up the pace after few years of subdued
growth. GST rate reduction also helps this sector in 2018 and upcoming years
Top five stocks which can create wealth in long run based on the above sectors are
Disclaimer: This is only a recommendation. Please do your own analysis in these stocks before
doing any investment. I personally hold these stocks in my portfolio.
LT foods
I had bought this at 65 and it is at 97 now . We can witness a level of 110 in the coming days
HDIL can move to about 72 from the present 62 odd levels . However keep a stop loss below 59
Anant Raj can rally to about 77–82 from its present price of 73.
NFL
It is one of my favourite picks for 2018 . For short term look for targets of 88 then after it crosses
89.50 look for targets of about 97–103.
Rain industries
It is at a high of 438 . Wait for some dips and buy this stock close to 400 and we can see a target
of 480–550 in a time frame of 2–5 months.
Greaves cotton
Allcargo logistics
It is one of my favourite picks for 2018.One can look for targets of 267 in the short term and 380–
450 in a time frame of 12–15 months.
VIP industries
Majority of retail investors today buy stocks based on the calls that they get from their brokerage
house or friends which should not be the ideal case. As there are several fake messages circulating
on a daily basis to invest in operator pumped stocks, it is better to learn how to select a stock for
investment and select in by ourselves. In this post, let’s look at 6 key metrics (ratios) that needs to
be looked into before stock selection.
What it means: P/E ratio means the price that we pay to buy an equity share in a company with
respect to earnings (Profit) it makes per share. Let us assume there are 2 companies namely X and
Y. Let us assume the price of both the companies is ₹100/share. Company X makes earnings of
₹25/Share and company Y makes earnings of ₹20/Share assuming that both the companies are
similar to each other on every other parameter. Which company would you choose?
In general, you need to evaluate the company P/E with its industrial average.
Note: in certain cases, P/E might be more for certain stocks with anticipation that earning will catch
up the share price due to know earnings news such as a deal win etc.,
Do not compare the P/E ratio of stocks from different sectors as the sectorial average P/E will
differ.
What it means: Book value means value total assets (post depreciation) of company subtracted by
the total value of liabilities and dividing it by the total number of shares the company has. Example
let us assume the company has assets worth 1crore and liabilities worth ₹50 Lakhs post
depreciation. The total number of shares in the company is assumed to be 5000.
Let us assume the market value to be 900, the P/B ratio will be
P/B = 900/1000 = 0.9
In general, any stock that has P/B ratio under 1 is considered to be undervalued stock.
Dividend Yield
What it means: It is a ratio that measures how much dividend a company pays with respect to its
share price. For example, let’s assume a company X that has a market value of ₹200. If the company
pays a dividend of ₹10 per share, then the dividend yield is calculated as noted below.
High dividend yield indicates the company is good for investment. In most cases where the
company pays a good dividend doesn’t retain much of its dividends and generates income to
shareholders so they are called as income stocks. Companies with similar profits that retain most
of the dividend invest in the business for business growth these kinds of stocks are known as growth
stocks.
What it means: D/E ratio is a measure of company’s debt repayment capacity with its
shareholder’s equity.
For example, if the total debt of a company is ₹20 Crores and total equity of the company is ₹200
Crores.
In general, if the value is less its good for investors as the company has less debt burden and in
future, they can take loans for further expansions etc., This value of this ratio varies according to
the sector and its capital expenditure. Sectors like textile, power, telecom and construction will
have high D/E ratio such as 200%(ratio = 2) whereas, sectors like FMCG will have comparatively
lesser D/E ratio.
Hence while evaluating a company for stock selection, it’s better to check the D/E ratio with its
listed peers.
For example, let’s assume a company X, with PAT ₹400 Crores and shareholders’ equity ₹2600
Crores.
Higher the ROE it’s better for investing. There is no standard benchmark however one should
compare the ROE of a particular stock with its industrial average before taking a decision.
Note: A company can be funded by both shareholders equity and debt when the company takes
high debt and low shareholders equity route, it may tend to have higher ROE as we don’t take the
debt into consideration while calculating ROE. Hence it’s better to check both ROE and D/E ratio
together for a better interpretation.
Current ratio:
What it means: Current ratio is a measure of how easily a company can pay off its debts when
they come due with the assets that company has. For example, let’s assume a company X, it has
total assets of ₹100 Crores and liabilities for ₹80 Crores.
In the above example, the current ratio is 1.25 which means the company has assets that could help
funding the liabilities when they come due. A current ratio under 1 indicates the company is weak
in terms of financial and investor should be cautioned before investing in the shares of the company.
Since the way the business is operated varies across different sectors current ratio of shares with
different sectors should not be compared in order to get a meaningful insight.
Which mutual fund is the best to buy as a SIP for 5-10 years?
Before jumping into the selection of mutual funds, this time I thought to guide you why you MUST
invest in equity mutual funds. The points are listed as below.
I noticed that many of investors simply invest in mutual funds just they have some surplus money.
The second reason may be someone guided that mutual funds are best in long run compared to
Bank FDs, PPF, RDs, or even LIC endowment product.
If you have clarity like why you are investing, when you need money and how much you need
money at that time, then you will get the better clarity in selecting the product. Hence, first identify
your financial goals.
You must know the current cost of that particular goal. Along with that, you must also know the
inflation rate associated with that particular goal. Remember that each financial goal to have it’s
own inflation rate. For example, education or marriage cost of your kid’s is different inflation that
the inflation rate of household expenses.
By identifying the current cost, time horizon and inflation rate of that particular goal, you can easily
find out the future cost of that goal. This future cost of the goal is your target amount.
Next step is to identify the asset allocation. Whether it is short term goal or long term goal, the
proper asset allocation between debt and equity is a must. I personally prefer the below asset
allocation. Remember that it may differ from individual to individual. However, the basic idea of
asset allocation is to protect your money and smoothly sail to reach the financial goals.
If the goal is below 5 years-Don’t touch equity product. Use the debt products of your choice like
FDs, RDs or Debt Funds.
While choosing debt product, make sure that the maturity period of the product must match your
financial goals. For example, PPF is best debt product. However, it must match your financial
goals. If the PPF maturity period is 13 years and your goal is 10 years, then you will fall short of
meeting your financial goals.
Return Expectation
Next and the biggest step is the return expectation from each asset class. For equity, you can expect
around 10% to 12% return. For debt, you can expect around 7% return expectation.
When your expectations are defined, then there is less probability of deviating or taking knee-jerk
reactions to the volatility.
Once you understand how much is your return expectation from each asset class, then the next step
is to identify the return expectation from the portfolio.
Let us say you defined the asset allocation of debt:equity as 30:70. Return expectation from debt is
7% and equity is 10%, then the overall portfolio return expectation is as below.
Once the goals are defined with target amount, asset allocations is done, return expectation from
each asset class is defined, then the final step is to identify the amount to invest each month.
There are two ways to do. One is constant monthly SIP throughout the goal period. Second is
increasing some fixed % each year up to the goal period. Decide which suits best to you.
Hope the above information will give you clarity before jumping into equity mutual fund products.
Having more fund does not give you enough diversification. Instead, in many cases, it may create
you portfolio overlapping and leads to underperformance.
How I selected Top 10 Best SIP Mutual Funds to invest in India in 2017?
I will first screen the top 15 funds in each category based on their returns to benchmark since
inception. The funds who consistently beaten the benchmark are listed in that 15. Once I have the
list in my hand, then I select the funds based on Risk-Return Analyzer.
Many simply select the funds based on eye-catching returns. However, at what cost the fund is
giving you a better return? To what extent it protects my investment during a downturn is what
differentiate from good fund to bad fund.
Again, I am not saying that these 1o funds alone be considered as “Top 10 Best SIP Mutual Funds
to invest in India in 2017”. There may be fewer other funds, which are good to compete with these
funds. However, I may be biased towards few Mutual Fund Companies (purely on their size and
how long they are in MF business in India). Below are the metrics I used to arrive at finally selecting
the funds.
If the fund cleared all these tests and given me around a minimum of 80% score since inception,
will be added to my list.
1. Beta-Volatility measure and tell how much the fund changes for a given change in the
Index. Lower the beta, lower the volatility. Hence, your fund must have lower beta.
2. Standard deviation-It tells us how for a given set of returns, how much do fund returns
deviate from the average. Lower the standard deviation, lower the volatility. Hence, your
fund must have lower beta.
3. Alpha-It is the risk-adjusted measure. By taking risks, how much the fund manager
generated the return over the benchmark. Higher the alpha, higher the outperformance
of the fund.
4. Sharpe Ratio-It is the risk-adjusted measure. Higher the Sharpe ratio, better is the
performance.
5. Sortino Ratio-It is the risk-adjusted measure. Higher the Sortino ratio, better is the
performance.
6. Treynor Ratio-It is also be known as reward ratio. Higher the Treynor ratio, better is the
performance.
7. Information Ratio-This is calculated by average excess return obtained compared to a
benchmark and divides it by the standard deviation of excess returns. Higher the
information ratio, higher the consistency in beating the benchmark.
8. Omega Ratio- It is a risk-return performance measure of an investment asset.
9. Downside deviation-This is also be called as BAD RISK.
10. Upside potential-This is exactly the opposite of Downside deviation.
11. R-squared- It is a measure of how correlated the fund’s NAV movement is with its index.
12. SIP Returns-For how many times the fund’s returns are above the index when we invest
in SIP.
13. Lump Sum Returns-For how many times the fund’s returns are above the index when
we invest in a lump sum.
Below are my selection in each category of funds.
In this category, I found that funds like SBI Bluechip and Birla Sunlife Frontline Equity Fund are
also best. However, I am going with below choices.
Check the consistency of Franklin India Bluechip Fund from this below image.
Check the consistency ratio of ICICI Pru Focussed Bluechip Fund in the below image.
As I said above, there are other funds also which scores equal or more than these two funds. But I
stick to these two funds. There is no reason of negating these two funds.
Again in this category of funds, I found few funds like SBI Magnum Multiplier Fund and Franklin
India High Growth Companies Fund. However, I stick to below two funds and which are my
favorite too.
Check the consistency ratio of Franklin India Prima Plus Fund in below image.
You may notice that for a 1-year return the score is dropped below 80 and currently showing as 70.
However, due to it’s long best track record, I suggest to invest and continue in the same fund (if
few already invested in this fund).
Check the consistency ratio of ICICI Pru Value Discovery Fund in below image.
Same is the case with ICICI Fund also. However, considering the consistency and just a drop in
that for a year does not mean that we must neglect this fund. Hence, I will stick to this fund.
Last year I selected HDFC Midcap Opp Fund and also Franklin India Prima Fund. I am continuing
with same funds.
Check the consistency performance of HDFC Mid Cap Opp Fund in below image.
Check the consistency performance of Franklin India Prima Fund in below image.
A drop in a year from both funds does not mean they are BAD. Hence, considering the consistency
of fund since long, I am suggesting these two as best funds.
I am unable to generate the consistency score for both the funds. I will update the image once I am
able to do so. However, these two funds are my favorite among small cap.
Best SIP Mutual Funds to invest in India in 2017 -Equity Oriented Balanced Funds
Among this category, I have in mind the funds like HDFC Balanced Fund, ICICI Pru Balanced
Fund, Tata balanced Fund and Franklin India Balanced Fund. But I go with HDFC and ICICI.
These are my choices of Best SIP Mutual Funds to invest in India in 2017. It does not mean that
they are universal choices. There are certain other funds too. However, I stick to these funds as my
best choices.