The festive season is upon us and it is that time of the year when the electronic media is abuzz with sound bytes of “Best 5 Mahurat stocks/ mutual fund picks” of XYZ, and so on.
If at all one must play this ‘game’ with mutual fund picks, methinks it makes far more sense to rather discuss some pedigreed and proven long-term performers who have delivered high double-digit CAGR returns over seven years and more, as that, according to me, is the minimum holding period an investor in equity must have.
Three such funds that come to mind if one applies the seven-year CAGR returns filter are Kotak Standard Multicap, L&T India Value and Mirae Asset Emerging Bluechip.
Kotak Standard Multi-cap Fund with an AUM exceeding Rs 25,000 crore is a well-positioned fund with the propensity to capture various themes that are trending.
It has no sectoral bias in its strategy with diversification at the stock level across market capitalisation. This fund now invests around 70-75 per cent of its portfolio in large-cap stocks and its portfolio turnover ratio has historically been lower than its peers. What is noteworthy is that this fund has comfortably outperformed its benchmark over most time horizons.
Mirae Asset Emerging Bluechip, which has an AUM exceeding Rs 7,500 crore, adopts an interesting bottom-up approach that is driven by value investing in growth-oriented businesses. It is aimed at participating in high-quality businesses up to a reasonable price and holding the same over an extended period of time.
Currently, its top five sectoral allocations are: banks (22-24 per cent), pharmaceuticals (11-13 per cent), consumer non-durables (9-10 per cent), finance (8-9 per cent) and software (7-8 per cent) and its investment mix is large-caps at 60-65 per cent, mid-caps at 35-38 per cent and 2-5 per cent in small-caps. This fund has been a very consistent performer, outperforming not just its benchmark but peers too across timeframes.
L&T India Value Fund has an AUM exceeding Rs 7,500 crore and as the name suggests, it predominantly invests in undervalued stocks, following a value investment strategy. It invests in stocks across sectors and market capitalisations with a strong value bias. It currently holds a diversified portfolio of 75-80 stocks with its top 10 holding stocks forming around 40 per cent of the portfolio.
At this point, its top five sectoral holdings are banks (24 per cent), software (9 per cent), finance (8 per cent), petroleum products (6 per cent) and construction (6 per cent). This fund has beaten its benchmark over longer time frames, that is five and seven years, which is par for the course, given the nature of this fund.
Now, these funds are proven performers, but fund selection is a specialised activity best left to those with the requisite experience and expertise. There is no ‘one-size-fits-all’ solution when it comes to the construction of an investment portfolio and that, in my opinion, is where many ‘direct’ investors make the mistake of what I call ‘risking 99 per cent to save 1 per cent’.
More in the fortnight ahead. Meanwhile, seasons greetings dear readers, and if inclined, consider ‘gifting’ an SIP to the less privileged, this Deepavali.