Mutual Funds Portfolio
Quarterly update: Sept 1, 2020
This space shall be updated every quarter with performance of mutual funds & our recommendations. Follow on Twitter to get regular updates on issues of Economics & Investing.
This space shall be updated every quarter with performance of mutual funds & our recommendations. Follow on Twitter to get regular updates on issues of Economics & Investing.
Mutual Funds Portfolio - Performance Review
Here is a review of the mutual funds we track & their performance updates. Please invest according to your chosen strategy from the investment portfolio advice pack. Our suggested funds are marked in bold letters. At any time, pls don't invest in more than 2 funds under each of the below categories
(a) Large cap funds
(b) Multi cap funds, ELSS funds
(c) Mid cap, Small cap & value funds
(d) Debt funds / Bank FDs / PPF
Restrict yourself to a maximum of 2 funds per category for a portfolio below Rs 2 crores. Debt funds can be substituted by bank fixed deposits, other bonds or PPF if you're alreay invested in such assets.
(a) Large cap funds
(b) Multi cap funds, ELSS funds
(c) Mid cap, Small cap & value funds
(d) Debt funds / Bank FDs / PPF
Restrict yourself to a maximum of 2 funds per category for a portfolio below Rs 2 crores. Debt funds can be substituted by bank fixed deposits, other bonds or PPF if you're alreay invested in such assets.
Benchmark Indices Performance
SIP Trends & Other Indicators
SIP inflows fell marginally below Rs 8000 crore levels post the market fall in March. This however would be considered great since majority of investors stayed steady implying that retail investors have come of age now & understand the importance of staying invested with SIPs, specially in the downturns. This is one of the best things in the stream of investor education that has happened to Indian markets in a long time.
The story of bulk investors however paints an exactly opposite picture. Equity funds flows declined to 50% in April & may followed by a net negative flow in July. This is typical of the bulk investing mindset that tries to time the markets. Unfortunately, in absence of any investing rules or discipline, they end up withdrawing the money at the worst possible time. This almost never ends well as history would suggest. The sharp inflows before March does indicate that Covid crisis took everyone by surprise.
Another promising sign is the high inflows in mid & small cap funds. These were under pressure since 2018 & represented value for those who have the appetite for long term wealth creation. While the large caps are still recovering from higher valuations after March, we see that mid & small cap funds have provided positive returns in 2020 since they already had a bloody fall in 2018. Valuation level of assets always matter in the markets.
Final Thoughts
Are you worried about the slowdown ? You should not. More so when you are on SIP mode. This is the time when a SIP pays off. I would like to draw you attention to the following points:
- As you see in historical returns, every year is not a lottery. 2014 & 2017 have shown that equity behaves in a non linear fashion. Since market discounts the future today, the expectation get priced in fairly quickly. Post 2017, we were expecting to see a few dull years, more so as the earnings growth has still not picked up. But this is where you get your money's worth with SIPs. You buy cheaper units in mutual funds.
- Key sectors on Indian economy have hit an air pocket. And this was true even before the Covid-19 pandamic hit us. The virus makes it even worse in the short run. With financial services & autos in a slowdown, or so it appears, there may be some downward pressure. Again, this is not something that people knew & we are still discovering the depth of it. But few earlier warnings from most experts & were very clear about the over-heating in top 15 large cap stocks in India.
- Good news is that India has entered a mature phase of controlled low inflation. The downside of low inflation is that one should adjust the scale & see 12% returns as great. The days of 20% YoY growth may not be as frequent unless inflation goes out of control. And we don't want that phase in India again.
- Since our economy is unlikely grow more than 5% on a steady rate in near future, investors should understand that returns from all assets are linked to that growth number. With that backdrop, we should moderate our return expectations from equity funds to a steady 10% to 12%. And given the context, this is great news. So lets stay along the course & keep those SIPs going. Happy investing!