Investors who want to diversify their portfolio, here’s an ideal scheme for you! Diversified Funds, as the name refers, invests across all categories of market caps such as – large cap, mid cap and small cap. They typically invest anywhere between 40-60% in large cap stocks, 10-40% in mid-cap stocks and about 10% in small-cap stocks. Sometimes, the exposure to small-caps may be very small or none at all. Thus, they master in balancing the portfolio. Moreover, diversified funds balance out the risk and reduce the volatility that usually comes with the stock investments. But, nonetheless, being an equity fund, they would still be affected by the market volatility.
Diversified Equity Funds have extremely performed well over the past five years, especially after elections. They have delivered 23% p.a. and 21% p.a. returns for the last three and five years, respectively. One of the key advantages of this fund is that it reduces the need to keep a track on multiple funds in the portfolio, distinctly. As diversified funds are invested across the market cap, the need to maintain separate portfolio in equity funds is eliminated. An investor who wants to being their investment in equities can park their funds in diversified funds. By Investing in top performing diversified funds, investors can earn good returns over the long-run. Thus, to make the process of selecting a good diversified Mutual Fund easier, we pre-selected the best funds to invest in. Since, the past three years, these funds have been delivering stable returns to its investors, and has also out-performed its benchmark in the past.
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Fund NAV Net Assets (Cr) Rating 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) 2018 (%) Information Ratio Sharpe Ratio Motilal Oswal Multicap 35 Fund Growth ₹27.4063
₹13,131 ☆☆☆☆☆ 3.2 10.7 11.8 10.3 11.3 7.9 -0.19 0.38 Kotak Standard Multicap Fund Growth ₹38.608
₹29,598 ☆☆☆☆☆ 7.8 12.4 17.1 13.6 10.3 12.3 0.02 0.71 Principal Multi Cap Growth Fund Growth ₹146.74
₹732 ☆☆☆☆ 6.9 8.5 8.2 10.8 8.4 3.9 -0.35 0.1 IDFC Focused Equity Fund Growth ₹39.84
₹1,506 ☆☆☆☆ 8.6 17.3 13.3 13.3 6.7 8.9 -0.02 0.41 SBI Magnum Multicap Fund Growth ₹52.7857
₹8,480 ☆☆☆☆ 6 10.3 15.8 12.3 10.6 11 -0.27 0.65 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 24 Jan 20 Note: Ratio's shown as on 31 Dec 19
Fincash has employed the following parameters for shortlisting the top performing funds:
Past Returns: Return analysis of last 3 years
Parameters & Weights: Information ratio with some modifications for our ratings and rankings
Qualitative & Quantitative Analysis: Quantitative measures like Expense Ratio, Sharpe Ratio, Sortino Ratio, Alpa, Beta, Upside Capture Ratio & Downside Capture Ratio, including fund age and the size of the fund has been considered. Qualitative analysis like the reputation of the fund along with the fund manager is one of the important parameters that you would see in the listed funds.
Asset Size: The minimum AUM criteria for equity funds are INR 100 Crores with some exceptions at times for new funds that are doing well in the market.
Performance with Respect to Benchmark: Peer average
Some of the important tips to consider while investing in diversified funds are:
Investment Tenure: Investors planning to invest in diversified funds should stay invested for minimum 3 years.
Invest via a SIP: SIP or Systematic Investment plan is the most efficient way to invest in a Mutual Fund. They not only provide a systematic way of investing, but also ensures regular investment growth. Also, due to their investment style, they can prevent the pitfalls of equity investments. You can invest in a SIP with an amount as low as INR 500.
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