ALL-SEASON FUNDS FOR LONG-TERM PROFITS
Basing a strategy on general maxims, such as “Sell when you double your money,” “Sell after two years,” or “Cut your losses by selling when the price falls ten percent,” is absolute folly. It’s simply impossible to find a generic formula that sensibly applies to all the different kinds of stocks. Thus wrote America’s start fund manager of the 1980s Peter Lynch in his Best-Selling Book “One up on Wall Street.”
Many mutual fund (MF) investors book profits too frequently/shortly or sell their MF units completely if the stock market starts falling. Or they hold too many mutual fund schemes in their portfolio. They mistake mutual funds for stocks and try the ‘diversification’ mantra with too many mutual fund schemes. If you want to build wealth, such investing mantras do not help you. To start with, selecting two or three well-diversified equity mutual funds is a good idea. Two or three well-diversified mutual funds are good enough to make long-term profits for small investors. The following is a list of seven well-diversified equity mutual funds with sustainable performance that are worth considering for investors in India who are interested in wealth creation over the long-term of five to 10 years. You can select two or three funds from this list and start investing at regular intervals without bothering about the general trend in the markets.
SEVEN ALL-SEASON MUTUAL FUND SCHEMES FOR LONG-TERM PROFITS:
1. Birla Sun Life Frontline Equity Plan A – Growth Option
2. DSP BlackRock Top 100 Equity – Growth Option
3. Fidelity Equity – Growth Option
4. Franklin India Bluechip – Growth Option
5. HDFC Top 200 – Growth Option
6. Quantum Long-Term Equity – Growth Option
7. UTI Dividend Yield – Growth Option
The details of the above seven funds are discussed below:
1. BIRLA SUN LIFE FRONTLINE EQUITY PLAN A – GROWTH OPTION
--- Its NAV is Rs 84.91 as on 14.02.2011
--- This low-risk fund’s long-term performance is good
--- It has got the ability to protect downturns in stock markets
--- The share of large-cap stocks is more than 80 per cent in the portfolio
--- It is managed by Mahesh Patil, a fund manager with good long-term record
2. DSP BLACKROCK TOP 100 EQUITY – GROWTH OPTION
--- Its NAV is Rs 97.01 as on 14.02.2011
--- This low-risk fund is suitable for conservative investors
--- Large-cap stocks constitute more than 95 per cent in the portfolio
--- It is managed by Apoorva Shah, an experienced fund manager
3. FIDELITY EQUITY – GROWTH OPTION
--- Its NAV is Rs 34.12 as on 14.02.2011
--- This fund aims for consistent returns with little downside risk
--- Large-cap stocks make up of around 80 per cent of the portfolio
--- It is managed by Sandeep Kothari, who follows bottom-up stock picking
4. FRANKLIN INDIA BLUECHIP – GROWTH OPTION
--- Its NAV is Rs 208.22 as on 14.02.2011
--- Launched in 1993, its long-term record is superior and consistent
--- Large-cap stocks make up of around 90 per cent of the portfolio
--- During stock market crashes, this fund provides protection to investors
--- It is managed by Anand Radhakrishnan, who focuses on long-term value
5. HDFC TOP 200 – GROWTH OPTION
--- Its NAV is Rs 203.14 as on 14.02.2011
--- Launched in 1996, its long-term record is matchless and impeccable
--- Large-cap stocks make up of around 85 per cent of the portfolio
--- During stock market crashes, this fund provides protection to investors
--- Prashant Jain of high repute has been managing this fund for nine years
6. QUANTUM LONG-TERM EQUITY – GROWTH OPTION
--- Its NAV is Rs 21.69 as on 14.02.2011
--- Large-cap stocks make up of around 70 per cent of the portfolio
--- Even though the fund house is small, the fund has built up a great record
--- Atul Kumar has been managing this fund for more than four years
--- The fund manager held 22 per cent in cash as on 31.01.11 and this cash call was proved correct as markets crashed in the past five weeks.
7. UTI DIVIDEND YIELD – GROWTH OPTION
--- Its NAV is Rs 31.09 as on 14.02.2011
--- Launched in 2005, it has provided consistent returns since 2007
--- Large-cap stocks make up of around 70 per cent of the portfolio
--- The fund has done well both in bear markets and bull markets
--- Swati Kulkarni with 18 years of experience is managing this fund
Notes: The above funds do not charge any Entry Load. However, they charge exit load of about one per cent if units are sold by investors before 180 days or 364 days from the date of investing; except Quantum Long-Term Equity fund which charges a heavy exit load of 4 per cent if redeemed before 180 days.
Other Mutual Fund schemes worth considering are: HDFC Equity, DSP BlackRock Equity, Templeton India Equity Income, UTI Opportunities, Canara Robeco Equity Diversified, IDFC Premier Equity Plan A, ICICI Prudential Dynamic, Tata Pure Equity, etc.
FIVE GOLDEN PRINCIPLES OF MF INVESTMENT
1. Well-diversified equity mutual funds with sustainable performance are the best for long-term investment of five to ten years...or even more. However, past performance may not be repeated in future.
2. Never borrow to invest in equity mutual funds. Invest only your surplus money which you may not need in the next three to five years.
3. Invest as per your asset allocation and risk profile.
4. Please remember that equity investments are vulnerable to market movements. At any point of time you may lose 20 per cent of your money in less than three months due to high volatility in Indian stock markets.
5. While selecting mutual funds, check whether they are protecting your money when the stock markets are in a downward trend.
NEVER INVEST IN EQUITY MUTUAL FUNDS…
--- if you are the type of person to overreact to scary newspaper/media headlines, like, “Blood on the Street,” “Stock markets in bear grip,” or “Investors have lost billions of rupees in three trading sessions.”
--- if you are the type of person to enter the market at peaks, like Sensex level of 20000 and sell at 10000 levels.
--- if you are the type of person to get carried away by the so-called market experts who say Sensex will reach 25,000 in one year or Sensex will lose 40 per cent in one year.
--- if you are like the greedy-gullible-sacrificial lambs (or High Networth Investors with low common sense) who had given blank cheques to a foreign bank based in Gurgaon and lost crores of rupees in December 2010.
“FINALLY, HAPPY INVESTING!”
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For a reader-friendly PDF versions: www.scribd.com/vrk100
Abbreviations:
MF – Mutual Fund
NAV – Nest Asset Value
Data Source: ValueResearchOnline
All the data are as on 31.01.2011 except NAV which is as on 14.02.2011.
About the Author: Passionate about financial markets. Watches Equity, Bond and Currency markets from a macro point of view. Loves writing articles on financial markets. So far, wrote more than 100 articles running into about 650 pages of original content, which have attracted more than 140,000 readers on SCRIBD. www.scribd.com/vrk100
Disclaimer: The views of the author are personal. Please consult your certified financial advisor before making any equity investments. The author is an equity investor and he has a vested interest in the stock market movements. It is safe to assume that he has investments in a few of the above mutual fund schemes.
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