The Biggest Mistake Mutual Funds Investors Can Make Right Now   Aug 10, 2018

S&P BSE Sensex* Re/US $ Gold Rs/10g Crude ($/barrel) FD Rates (1-Yr)
37,869.23 |313.07

0.83%
69.11 |-0.48

-0.70%
29,486.00 | -91.00

-0.31%
71.29 |-0.51

-0.71%
5.00% - 7.00%
Weekly changes as on August 09, 2018
BSE Sensex value as on August 10, 2018
Impact
 
Approach Debt Mutual Funds

Within days of its listing on bourses, the HDFC Asset Management Company (HDFC AMC) has suddenly become a hot topic of discussion among investors and market experts.

Some investors are quizzed about a Systematic Investment Plan (SIP) in HDFC AMC being more rewarding than an SIP in any of the schemes offered by HDFC Mutual Fund.

Such questions often pop out of a confused mind.

Mind boggling events happened in the immediate past and often affect, your, the investors', decisions to a great extent.  

Take another example.

In January 2018, investors poured in Rs 23,055 crore in equity-oriented schemes including Equity Linked Savings Schemes (ELSS), arbitrage funds and hybrid funds.

Investors are losing interest in mutual funds?
FundSelectequityfund
Data as on July 31, 2018
(Data Source: AMFI, PersonalFN Research)

Do you know why?

2017 was an exceptional year for equity markets and so as for mutual fund investors.

Those who invested in mid and small cap-oriented schemes reaped attractive returns.

The momentum continued until January 2018 with broader indices scaling new highs.

But like always, bears caught bulls unaware in February and March.

It looked like the market was set to enter a bear phase.

Fast forward to August, BSE Sensex, and CNX Nifty are at fresh highs.

Unfortunately, many equity-oriented mutual fund schemes are quoting below the highs of January 2018.

Many midcap stocks are still 15%-20% down from their peaks.

And it will be difficult to find a mutual fund scheme that doesn’t have at least a couple of battered stocks in its portfolio.

And what’s the investors’ reaction to this topsy-turvy of the market?

In July 2018, the net flows to equity oriented mutual funds reduced to Rs 10,872 crore. Bear-attack was scary indeed!

Some might argue: In 2017, the mutual fund industry had tailwinds of demonetisation that had pushed many first-time investors towards mutual funds. But now that the remonetisation exercise is complete, money is flowing out of mutual fund schemes.

This might be true to an extent.

But all said and done, such a drop in the Assets Under Management (AUM) of mutual funds isn't only on account of remonetisation. Had it been the case, January and February 2018 would not have seen massive inflows.

And then what justifies a sudden drop in March 2018?

Government’s decision to tax long term capital gains has affected the investor sentiment negatively as well.

[Read: How LTCG Tax On Equity Investments Can Derail Your Financial Plan]

And it’s likely that sharp cuts in the Net Asset Value (NAV) of mid and small cap oriented schemes might have put off retail investors.

[Read: Do You Fear The Decline In Mid Cap Funds? Don’t, If You Invest The Right Way!]

SEBI’s recategorisation diktat is also one of the reasons for mid and small cap mayhem.

And possibly, many investors have discontinued their SIPs.

But discontinuing SIPs (Systematic Investment Plans) in mutual funds can be the BIGGEST mistake, particularly now when the markets have scaled a new lifetime high.

Have you stopped your SIPs thinking markets are likely to face difficulties in future?

SIPs are meant to take advantage of the market volatility.

If you discontinue SIPs during market downturns, you are likely to miss the benefit of Rupee-cost averaging.

Read: All You Need To Know About SIPs

Conversely, if you invest lump sum money in equity mutual funds when markets are at all-time high, you are likely to suffer if any unforeseen event drags stock indices.

What you should ideally do, especially under such circumstances?

You need not panic if you have invested in best mutual fund schemes considering your:

  • Age;
  • Risk profile;
  • Investment objectives;
  • Financial goals;
  • Asset Allocation; and
  • Investment time horizon before goals befall

But if you haven’t you need to thoroughly review your mutual fund portfolio right away! But this is the trickiest part.

So, reach out to PersonalFN’s SEBI-registered investment advisers on 022-61361200 or write to info@personalfn.com

PersonalFN’s SEBI registered investment advisers, who effectively serve you as Financial Guardians, will help you ascertain your risk profile, chart your asset allocation accordingly, select suitable investment avenues including the best mutual fund schemes, and handhold you in the journey of wealth creation and accomplishing your financial goals.

Editor’s Note:

Do you want to select the best mutual fund schemes for your investment portfolio?

Yes?

PersonalFN’s premium mutual fund research service, FundSelect is the answer to select the best mutual fund schemes.

PersonalFN's FundSelect has 15+ years of impeccable track record.

FundSelectequityfund
(Source: ACE MF, PersonalFN Research)
Performance as on March 28, 2018
Past performance is no guarantee of future results

FundSelect is been based on one simple motto: “Be steady. Be alert. Be winning.”

Every month, our FundSelect service will provide you with an insightful and practical guidance on equity funds and debt schemes——the ones to buy, hold, or sell—— to assist you in creating the ultimate portfolio that has the potential to beat the market.  Subscribe to FundSelect today!

Things To Note When Investing In Mutual Funds

Impact

Mutual fund folios have risen 28% from 5.82 crore in June 2017 to 7.46 crore in June 2018.

Are you one of those investors who has contributed to the tally of new folios?

Of course, there are several reasons why mutual funds have witnessed greater investors’ participation.

The “Mutual Fund Sahi Haicampaign run by Association of Mutual Funds in India (AMFI) created immense awareness among potential and new investors.

Plus, the incessant efforts of independent investor education platforms and responsible investment research houses such as PersonalFN are yielding results.

[Read: Are All Mutual Funds ‘Sahi Hai’? Find Out Here… ]

Today more investors are willing to invest in mutual funds.  A sustained bull run in the Indian equity markets during the last four years has certainly been a confidence booster as well.

To read more, please click here.

HDFC AMC Makes 65% Listing Gains! Should It Attract Mutual Fund Investors?

Impact

It seems running an Asset Management Company (AMC) is a highly profitable business.

On the first day of listing, the HDFC Asset Management Company (AMC) made a debut on stock exchanges in style rallying a massive 65% at closing.

This wasn't a surprise considering that it was oversubscribed nearly 83 times.

Many mutual fund investors might conclude if the market has welcomed HDFC AMC in such a grand fashion, investing in HDFC Mutual Fund schemes could be equally rewarding too.

Believe it or not, you would be mistaken!

To read more, please click here.

Is Your Mutual Fund Worth Your Money?

Impact

We want to make the best possible choice in everything that we do.

But the crucial part is how do we conclude what’s the best option for us, especially when it comes to mutual fund investing.

It’s very tempting to look at the recent performance of a mutual fund scheme and pick the one that has generated maximum returns over the last one year.

Similarly, many investors fall for star ratings allotted by independent mutual fund rating agencies.

“So what’s the harm”, you might think.

But, here’s something to think about!

[Read: 10 Basics First-time Mutual Fund Investors Need To Know]

Do note that the best performing mutual fund scheme of this year may not necessarily be the top performing scheme in the future.

Or the scheme might have undertaken higher risk to generate superlative returns and might not be suitable for you.

To read more, please click here.

New Fund Offer

Is Mahindra Credit Risk Yojana Worth Risking Your Hard Earned Money?

Mahindra Credit Risk Yojana (MCRY) is a mutual fund scheme from the stable of Mahindra Mutual Fund. It is an open-ended debt scheme–––a credit risk fund–––that has a mandate to invest predominantly in AA and below rated corporate bonds (excluding AA+ rated corporate bonds).

Under normal circumstances, MCRY will invest a major portion (65-100%) of its asset in AA^ and below rated Corporate Bonds, and at times, could invest some portion (upto 35%) in other debt & money market instruments (including securitised debt).

To read the complete note, click here.

Fund Of The Week

What is Driving Kotak Standard Multicap Funds Extra-Ordinary Performance

The erstwhile Kotak Select Focus Fund has been converted into a multicap fund and is now known as Kotak Standard Multicap Fund. The fund’s extra-ordinary performance has seen it in a limelight for quite some time.

With a market-beating performance, the fund has caught the investors’ fancy, pushing it to the list of Top 5 largest diversified equity funds. In the last two years, the fund has seen a four-fold increase in size. And currently it has a corpus of about Rs 20,000 crore under its management, which nearly raises concern about its capacity.

To read the complete note, click here.


Financial Terms. Simplified.


Return on Equity (ROE): Return on equity (ROE) is the amount of net income returned as a percentage of shareholders' equity. Return on equity (also known as "return on net worth" [RONW]) measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.

ROE is expressed as a percentage and calculated as:

Return on Equity = Net Income/Shareholder's Equity

Net income is for the full fiscal year (before dividends paid to common stockholders but after dividends to preferred stock.) Shareholders' equity does not include preferred shares.

(Source: Investopedia)


Quote: "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.”‒Warren Buffett