The aim should be to create a diversified portfolio with equity for growth and debt for protection from the downside.
Mutual funds, especially those with equity exposure, have been giving good returns along with the rise in the stock market. More and more investors are getting attracted towards mutual funds to participate in the bull run. However, choosing a fund out of the plethora of schemes available is a tough task.
The question asked is which mutual fund should one invest in and how much should one invest in a particular scheme at a particular time? The questions can be many unless you have any purpose to achieve certain financial goals in life.
“Retail investors should be guided by personal financial goals, asset allocation strategy, and investment risk profile when they select mutual funds for their investment portfolio. The aim should be to create a diversified portfolio with equity for growth and debt for protection from the downside,” told Anil Rego – CEO, Right Horizons to Moneycontrol.com.
Moneycontrol asked Rego, a well-known personal finance advisor, to identify his picks for the coming year.
“We have our own in-house ranking methodology based on above three years weighted risk-adjusted returns. In this process, we give higher weights to above 3 years returns and lower risk levels (like Beta and Standard deviation); based on the output, we go through the sectors and speak to fund managers to understand the future performance and adjust our final recommendations,” he said.
Here are Rego’s top picks in equity-focused funds:=>SBI Bluechip Fund in large-cap category,
=>Franklin India Prima Fund in midcap space,
=>SBI Small & Midcap Fund in the small-cap segment,
=>Most Focused Multicap 35 Fund in the multi-cap category
=>HDFC Balanced Fund in the equity-oriented hybrid area.
“All these funds have demonstrated superior risk-adjusted returns delivered alpha across relatively long periods of time and managed volatility better than peers. You can invest in these schemes but make sure the horizon of your investment should not be of less than 5 to 7 years,” Rego said.
However, to have a balanced portfolio and to adjust risk, you should also invest in debt mutual funds. On the fixed income side, Rego recommended these following 5 fund-picks:=>ABSL Corporate Bond Fund
=>Franklin India Income Opportunities Fund (credit opportunities category),
=>HDFC Corporate Debt Opportunities Fund
=>ICICI Pru Corporate Bond Fund (bond fund category)
=>DSPBR Income Opportunities Fund in the income product space.
“These debt funds have the ability to deliver beat traditional avenues and give better tax-adjusted returns for investors who are willing to stomach little more risk," he told Moneycontrol.However, Rego advises investors to read mutual fund factsheet and track the consistency of fund performance over long periods. You should also review and monitor your portfolio risk periodically so that you can arrive at good fund choices on a timely basis, and take necessary measures as when required taking the help of an investment adviser.