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MC30: A sparkling list of the 30 best mutual funds from key categories

To help you create a well-rounded MF portfolio, Moneycontrol personal finance filtered a crisp set from a list of over 1,000 MF schemes

August 11, 2021 / 05:55 PM IST

How do you choose a mutual fund (MF) that is most suitable for you? There are 1,554 MF schemes out there. Even if you remove 522 closed-end schemes, you are still left with close to a thousand funds to scan and decide. Even if you break them into three broad categories, you have 351 equity, 313 debt and 140 hybrid funds on offer. Making choices among passive funds isn’t easier either. There are 49 index schemes and 11 gold exchange-traded funds (ETFs). In addition, there are 97 other equity, debt and international ETFs.

What you need, however, is a portfolio of just about 10 MF schemes, across categories. But how do go about choosing?

Enter MC30 or short for Moneycontrol 30. MC30 is a curated basket of 30 hand-picked MF schemes for you to choose from. The rationale for MC30 is to give you a manageable number of MF schemes, from more than 1,000 schemes in the industry and across asset classes, for you to pick and invest in.

That is not to say you must invest in all the 30 schemes. Instead, you should invest in just 6-10 MF schemes to build a strong investment portfolio.

But all that you now need to do is to build a MF portfolio of just about 8-12 funds, across asset classes.

Also read: How to use MC30?

Schemes that have made it to the MC30 have passed several hoops of risk-return analysis to make sure they’ve stood the test of time. After we eliminated tiny-sized schemes and those that lack sufficient history, we ran the remaining schemes through a rigorous risk-return analysis, called the MC30 MF rankings and star ratings. We checked for their consistency in returns, volatility and portfolio concentration risks. But MC30 MF rankings and star ratings is a report card.

From the schemes that made it to the top quintile, we curated our list of 30 schemes that we analysed. These are expected to do well in the future.

MC30 is an annual exercise, with reviews done every February. After this review, there may be inclusions and exclusions. MC30 is a list of the best schemes for you to invest your money in. Having mentioned these facts, we must say that some schemes are bound to go off the rails. Either their strategies may not work out as expected, or some may see fund manager changes that may warrant a change in our outlook as well. Some schemes could make wrong calls or, just simply, our reading may go wrong as well. But our endeavour is to keep such outliers to a bare minimum. Happy investing!

Also see: The complete MC30 basket of mutual fund schemes

Equity – Large cap

Mirae Asset Large Cap Fund

Large-cap equity funds have struggled over the past several years to even match their benchmarks, let alone outperform the indices. But Mirae Asset Large Cap Fund (MALCF) is an exception. Keeping its short-term underperformance aside for a moment, it has done quite well in the long run, as compared to peers and its own benchmark index. Gaurav Misra and Harshad Borawake jointly manage the fund.

Also read: How to use MC30?

Its investment (of about 12-13 percent of its corpus) in mid and small-cap stocks has helped bolster the fund’s performance. With a corpus of nearly Rs 26,000 crore, MALCF is one of the largest schemes in the category.

Canara Robeco Bluechip Equity Fund

At Rs 3,300 crore, Canara Rob Bluechip Equity Fund (CRB) has a corpus size that’s much smaller than that of peers. But CRB packs in quite a punch. Its five-year return of around 17 percent (as of July 9, 2021) is the highest among actively-managed large-cap equity funds. Shridatta Bhandwaldar has managed this fund since 2016 and has an impressive track record.

Bhandwaldar places a lot of importance to promoter integrity. Of the 100 stocks in BSE 100 index, he says there are at least 20-odd companies he won’t ever invest in. He invests nearly 70 percent of the scheme’s corpus in companies that he calls ‘compounders.’ These are companies with competitive business advantage and are consistent in their growth across market cycles. But he keeps 30 percent aside for what he calls alpha generators – companies that see a sharp jump in share prices when their value is unlocked.

Also see: The complete MC30 basket of mutual fund schemes

Equity – Flexi-cap

Parag Parikh Flexi Cap Fund

Parag Parikh Flexi Cap Fund (PPFC) is one of the few India-focussed diversified equity schemes that also invests in overseas markets (almost entirely in the US markets and up to 35 percent of the corpus). That is one key reason why it has been one of the best-performing equity funds in its category in recent years. It comes from a fund house that has deliberately kept its new scheme launches to a bare minimum ever since it started its journey eight years ago.

It doesn’t hesitate to deploy cash in falling markets, like it did in March 2020 when equity markets fell sharply after COVID-19 pandemic was declared. That is also why the fund has done well in rising as well falling markets.

Also read: MC30: The methodology behind the curated basket of mutual fund schemes

Kotak Flexicap Fund

At a corpus size of over Rs 36,000 crore, Kotak Flexicap fund (KFF) is the largest scheme in this category. Harsha Upadhyaya has been managing the fund since 2013.

Despite being in the flexi-cap category, the fund’s portfolio tilts towards large-cap stocks. It follows a top-down investment approach. Upadhyaya first identifies the sectors he thinks that would do well and then identifies the companies within. As a result, the scheme has concentrated sector exposure.

Upadhyaya prefers companies that come with good corporate governance and allocate their capital efficiently, and are available at an attractive valuation.

UTI Flexicap Fund

Like many multi-cap funds, UTI Flexicap Fund (UFF) too changed into a flexi-cap scheme, a new category created by SEBI last year. Ajay Tyagi has been managing this fund since 2016.

Tyagi chooses growth stocks with high-quality businesses, strong balance-sheets and cash flows, which can grow fast. He says valuations only come last on his checklist. The portfolio isn’t churned much, which suggests reasonable fund manager conviction. Nearly 80 percent of the stocks remains in the portfolio for five or more years.

The fund has a preference for value-oriented stocks, which explains its slight underperformance between 2015 and 2018. But it recovered soon, thanks to Tyagi’s stock picking skills and value strategy making a strong comeback over the past year. It manages to contain downsides.

Also see: The complete MC30 basket of mutual fund schemes

Equity – Mid cap

Axis Midcap Fund

Most of Axis Mutual Fund’s equity schemes have consistently outperformed peers and the market. Among mid-cap schemes, Axis Midcap Fund (AMF) is a good pick. And here’s why.

In 2018 and 2019, when mid-cap stocks didn’t do that well, AMF was better at protecting downsides than most of its peers. It’s Sortino Ratio (a key risk-adjusted return metric) was the highest in its category. Shreyash Devalkar has been managing AMF since 2016.

Also read: How to use MC30?

Devalkar likes companies that have free cash flows, low debt-levels, and good corporate governance. He also goes for mid-sized companies in industries where there aren’t any large-sized firms. His investments in larger companies in sectors such as plastic pipes (Astral and Supreme Industries that delivered 182 percent and 100 percent, respectively, over the last one year) and Cholamandalam Investment and Finance Company (one-year return of 148 percent return) and Sundaram Finance (102 percent) worked well.

AMF takes active cash calls. The fund has held up to 20 percent of its assets in cash at times. Currently, it holds 65 percent in mid-caps, 23 percent in large-cap companies and five percent in small-cap firms.

Also read: MC30: The methodology behind the curated basket of mutual fund schemes

Kotak Emerging Equity Fund

Kotak Emerging Equity Fund (KEEF) invests at least 65 percent of its assets in midcap stocks and the rest in shares of large and small-cap companies.

KEEF is one of the largest schemes in this category managing Rs 14,000 crore. But a large size hasn’t affected its allocation to mid and small-cap stocks. It has invested at least 90 percent of its equity portion in such firms, as against the overall category average of 84 percent.

KEEF held 58-70 stocks in its portfolio over the last five years, making for reasonably diffused holdings. Unlike most of the funds in the mid-cap category, it has not taken active cash calls and has been nearly fully invested (average cash holding was 3.7 percent for the last five years).

Pankaj Tibrewal has been managing the fund since 2010. He likes companies with low levels of debt. Focusing on companies that are leaders within the sectors they operate in has worked well, such as electrical wires, cables, bearings, tiles, capital goods or infrastructure,” he says. Some of the stocks worked well for him in these space over the last one year are Supreme Industries (around 100 percent), APL Apollo Tubes (348 percent), JK Cement (115 percent) and Kajaria Ceramics (156 percent).

DSP Midcap Fund

Steady performance across time frames and the ability to protect downsides make DSP Midcap Fund (DMF) a good pick. DMF is also among the least volatile mid-cap funds, as measured by standard deviation, a key risk metric. Vinit Sambre and Resham Jain manage this fund.

Sambre maintains a low portfolio turnover ratio (among the least in the category) that measures how frequently the fund manager churns the holdings. DMF holds about 40-45 shares, as against the category average of nearly 60 stocks.

DMF missed the opportunity to gain from the broad-based rally in the last one-year, given its relatively defensive portfolio positioning in light of the COVID-19 pandemic. Barring such short-term glitches, DMF has been a long-term winner.

The scheme takes active cash calls (up to 10 percent of portfolio corpus), which helps it to cut losses in falling markets. Currently, DMF holds 67 percent in mid-caps, 16 percent in large-caps and 12 percent in small-caps.

Invesco India Midcap Fund

Just going by past performance, Invesco India Midcap Fund (IMF) may not be your first pick in the category. But don’t mistake this fund’s consistency for lack of mojo. And its corpus size is just about Rs 1,707 crore.

Pranav Gokhale and Neelesh Dhamnaskar have been jointly managing this fund since 2018. Gokhale says that they look for niche businesses. Companies must have a healthy balance sheet. Integrity of the promoter and management is important.

Its investments in the financial services sector have always been lower than what the others in the category allocate. Though it did limit the scheme’s upside during phases when bank stocks did well, it helped to contain the volatility during corrections. This is a low-risk mid-cap fund.

Also see: The complete MC30 basket of mutual fund schemes

Equity – Small cap

Axis Small-cap Fund

Axis Small-cap Fund (ASF) does well in rising and falling markets. In 2018 and 2019, when small-cap stocks saw a sharp correction, ASF contained the fall better than most others. For instance, in 2018, the NAV of small-caps funds fell 17 percent on an average. ASF’s value declined just 9 percent.

Like AMF, ASF too takes active cash calls. At times the scheme holds up to 26 percent of its corpus in cash so that scheme is cushioned in case of heavy market falls, when mid-cap indices fall like nine pins.  ASF scores on the Sortino ratio.

Anupam Tiwari has been managing this fund since 2016.

Tiwari increased exposure to construction and software, which boosted the portfolio’s return significantly. Many of the stocks more than doubled over the last one year, such as Brigade Enterprises (122 percent), KNR Construction (130 percent), Tata Elxsi (363 percent) and COFORGE (178 percent).

Also read: MC30: The methodology behind the curated basket of mutual fund schemes

SBI Small-cap Fund

Prudent stock selection and efficient cash calls have helped SBI Small-cap Fund (SSF) deliver robust returns in rising markets and fall less than its peers during declines. R. Srinivasan has been managing this fund since 2009.

Srinivasan focuses on generating healthy returns. Prior to SEBI’s re-categorization exercise of June 2018, he used to hold a highly concentrated portfolio of about 22-30 stocks. After the re-classification exercise, and with a subsequent rise in its corpus (Rs 9,091 crore as of June 30, 2021), SSF is much more diversified. The total number of stocks has now gone up to 50. But individual stocks rarely account for any more than 6 percent of the assets.

Its investments in companies such as Elgi Equipments, Hawkins Cooker, Relaxo Footwear and Alembic contributed to its returns.

Also see: The complete MC30 basket of mutual fund schemes

Equity – Tax-savings

Canara Robeco Equity Tax Saver

Unlike the peers in the ELSS category that have been enjoying the comfort of managing a less active portfolio (they follow buy and hold strategy) on account of the three-year lock-in, Canara Robeco Equity Tax Saver Fund (CRETS) churns its portfolio very actively. It is evident from its churning ratio of 160 percent, which is far higher than the category’s 70 percent over the last three years. A higher churning ratio also helps the fund mitigate the high-conviction or concentration risk in a portfolio.

Cheenu Gupta and Shridatta Bhandwaldar jointly manage this fund. They prioritize promoter integrity while picking stocks. The fund managers invest nearly 50 percent of the scheme’s corpus in companies that they call ‘compounders.’ These are quality businesses, which have consistently done well in the past, and are expected continue that way over the next 2-3 years. But they keep 25 percent aside for what they call alpha generators– companies that are cyclical or firms that are expected to do well because of changes in the business environment. They invest the remaining 25 percent in emerging businesses.

Kotak Tax Saver

Kotak Tax Saver (KTS) rounds up our ELSS picks. Harsha Upadhyaya has been managing the fund since 2013. As a fund manager at the helm for more than seven years now, he ensures that the portfolio strategy remains consistent. That’s good news.

Upadhyaya selects businesses with better corporate governance, efficient capital allocation structure and those available at an attractive valuation. A three-year lock-in allows him to invest in fundamentally strong stocks, but those that could suffer from short bouts of volatility. He has invested around 55-60 percent of the scheme’s corpus in large-cap stocks and the rest in mid and small-cap shares.

The scheme has done well in rising and falling markets.

Also see: The complete MC30 basket of mutual fund schemes

Equity – Focus

Axis Focused 25 fund

Axis Focused 25 fund (AF25) can hold up to 25 stocks in its portfolio. It follows a flexi-cap approach of investing across large, mid and small-sized companies.

Jinesh Gopani, who heads the AMC’s equity fund management, has been in charge of this scheme since 2016. To reduce the fund’s risk levels on account of concentrated holdings, he invests about half the corpus in low-volatility stocks. The remaining portfolio gets invested in cyclical and emerging themes that give a return-kicker to the fund. AF25 generally avoids government-owned companies. Despite a focused portfolio, not more than 20 percent gets invested in a single sector. Over the last three years, it increased exposure to large-caps while pruning its small-cap holding and moderating its mid-cap allocation. This helped funds to gain from the choppy market condition.

His deft stock-picking has paid off; the fund’s risk-adjusted returns have been among the highest in this category.

SBI Focused fund

SBI Focused fund (SFF) follows a bottom-up approach and is managed by R Srinivasan since 2009. He also heads the fund house’s equity division. Like AF25, the scheme invests in companies across market capitalisation.

Like many focused funds, SFF doesn’t follow a benchmark index. The strategy is risky, but Srinivasan’s stock picking skills have ensured that the fund remains steady on its path.

Before SEBI’s re-categorisation exercise, SFF invested predominately in mid and small-cap stocks. But ever since it formally became a focused fund, it almost exited its small–cap positions, brought down its mid-cap holdings and added large-cap stocks. Currently, more than half of its assets lie in large-caps.

In the past two years, SFF has added exposure to foreign (mostly US) securities (currently around 7 percent of the portfolio). Such exposure has given a kicker to returns.

Also see: The complete MC30 basket of mutual fund schemes

Hybrid – Aggressive

Canara Robeco Equity Hybrid Fund

Canara Robeco Equity Hybrid Fund (CREHF) invests 65-80 percent of its assets in equity, while the rest is deployed in debt instruments. CREHF has been one of the least volatile in this category. The scheme’s low volatility has led to superior risk-adjusted returns when compared to those of peers over the long term. That’s what this category aims to achieve due to its debt holdings.

It has consistently beat the average returns given by large-cap funds over the long run.

On the equity side, CREHF follows a multi-cap approach, with bias for large-caps. The fund manager mainly chooses quality businesses with superior management execution strategies. These filters keep the risks low.

On the debt side, the fund follows a blend of accrual and duration strategies. It is one of the few schemes in the category that invest exclusively in the highest-rated debt instruments.

Also read: MC30: The methodology behind the curated basket of mutual fund schemes

DSP Equity & Bond Fund

In addition to CREHF, we also like the DSP Equity & Bond Fund (DEBF), which has been a solid performer. Atul Bhole manages the equity portfolio and Vikram Chopra looks after the debt portion. Its corpus size is Rs 6,966 crore as on June 2021

For a hybrid fund, the scheme is quite diversified with its equity portion is spread over 60-65 stocks. To keep the risks in check, nearly two-thirds of the equity assets are invested in large-caps and the rest in mid and small-cap stocks.

Bhole considers only good businesses with management competency and growth prospects, rather than valuations, first. Bhole prefers to be conservative given the scheme’s nature and target segment. On the debt side too, Chopra keeps the risks to a bare minimum; he sticks to highly-rated debt instruments with shorter maturity profiles.

Also see: The complete MC30 basket of mutual fund schemes

Debt – Short-Term

ICICI Prudential Short Term Fund

As mandated by SEBI, short-term debt funds must maintain a portfolio duration of between one and three years. These funds are meant for investments done with a 2-3 year time horizon. ICICI Prudential Short Term Fund (ISTF) is one of our chosen schemes for this purpose.

The fund is managed actively to ensure reasonable returns, without compromising on portfolio quality. Apart from investing in g-secs (government securities) opportunistically, it invests up to 20 percent of its assets in AA rated and equivalent securities.

Fund manager Manish Banthia says that although the scheme invests in AA rated assets, the fund house’s in-house risk management team monitors the holdings closely. ISTF has around 7 percent exposure to perpetual bonds. Banthia insists that the AT1 holdings are of those banks that the fund house is comfortable with in terms of the existing capitalisation, quality of assets and ability to raise capital.

Also read: How to use MC30?

Despite many uncertainties and a tough environment over the past couple of years amidst defaults of many companies, ISTF did well to avoid poor securities and credit stress.

At Rs 20,015 crore (as on June 30, 2021), ISTF is the second-largest scheme in its category at present. Its portfolio is well-diversified with over 200 debt securities; the most it has invested in a single corporate group is 4.6 percent (as of Feb 2021).

HDFC Short Term Debt Fund

For the past few years, HDFC Mutual Fund has delivered well on its debt schemes. HDFC Short Term Debt Fund (HSTF) makes it to MC30.

HSTF maintains the portfolio duration between one and three years. It invests over 80 percent of its corpus in the highest rated instruments; around 6-10 percent gets allocated to AA rated and equivalent papers. Despite being hit by the IL&FS crisis in 2019, the scheme recovered. Its holding in IL&FS was just 0.5 percent. And although it holds around 4.8 percent in AT-1 bonds, we don’t think that’s any problem for the scheme.

Axis Short Term Fund

Axis Short Term Fund (ASTF) has been a consistent performer that doesn’t take credit risk. Aside from investing in highly-rated bonds, it allocates to g-secs too, to earn some extra returns.

Other than miniscule exposure to Dewan Housing Finance Corporation, the portfolio has consistently been clean. And ASTF recovered its dues from the company. Like many other debt funds, it has some investments (around 2 percent) in AT1 bonds, but fund manager Devang Shah says there is no risk as they are issued by good-quality banks.

Despite having a conservative portfolio, the fund has given healthy returns and outperformed the category average over the past one, three and five-year time periods.

If interest rates rise remain steady and or even rise, an allocation to short-term funds bodes well, as they are less volatile than medium to long duration debt schemes.

Also see: The complete MC30 basket of mutual fund schemes

Debt – Banking & PSU

Nippon India Banking & PSU Debt Fund

Nippon India Banking & PSU Debt Fund (NBPDF) has been a top quintile scheme in its category across timeframes. Banking and PSU debt funds invest at least 80 percent in bonds issued by banks, government-owned firms and municipalities. The balance is invested in government securities (g-secs) and corporate bonds.

Over the last two years, the fund has invested only in the highest AAA rated instruments issued by government-owned firms and banks. But it also tactically invests around 20 percent in g-secs to use interest rate movements to its advantage. The fund also invests a small portion in private corporate firms that come with strong financials, such as Sundaram Finance and Bajaj Housing Finance.

The fund has avoided Additional Tier-1 (AT1) bonds. A modified duration of 1.5-3.5 years makes this fund far less volatile to sudden interest rate movements. With close to 91 securities in the fund (Rs 6,410 crore corpus), it’s fairly diversified.

Kotak Banking and PSU Debt Fund

Kotak Banking and PSU Debt Fund (KBPDF) avoids bonds issued by private-sector firms. Instead, it sticks to securities issued by banks, State-owned firms and g-secs.

But it does invest around 13 percent of its assets in AA and equivalent rated securities to earn a returns kicker. Additionally, it has held around 9 percent in AT1 bonds. But Lakshmi Iyer, chief investment officer-fixed income and head of products, says that these have been issued by banks with strong financials.

Apart from investing in the highly-rated bonds, the scheme has also reduced its risk levels by ensuring a non-concentrated exposure. As per its Jan 2021 portfolio, the most it has invested in a single corporate group is 8.7 percent.

IDFC Banking and PSU Debt Fund

True to the fund house’s aversion to taking credit risk, IDFC Banking and PSU Debt Fund (IBPF) has consistently held a high-quality portfolio. Almost its entire portfolio comprises AAA and equivalent rated instruments over the last three years. This mitigates the overall credit risk in the portfolio. It also avoids AT1 bonds.

However, the fund does hold g-secs and bonds issued by private sector firms, within SEBI’s overall limit. But fund manager Anurag Mittal has stuck to high-quality private sector firms such as Sundaram Finance and Reliance Industries.

IBPF follows a roll-down strategy, which ensures that the portfolio’s duration progressively comes down over a period of time. Its modified duration has decreased to 1.6 years from 2.4 years over the last 12 months.

To compensate for its conservative approach, it allocates slightly more to its top holdings, going up to 12 percent for individual securities.

Also see: The complete MC30 basket of mutual fund schemes

Debt – Corporate Bond

Sundaram Corporate Bond Fund

Corporate bond funds carry low credit risk, as they are mandated to invest at least 80 percent of their assets in AA+ and higher rated instruments.

Sundaram Corporate Bond Fund (SCBF) has consistently invested nearly all of its corpus in AAA securities for the past five years. Its fund managers Dwijendra Srivastava and Sandeep Agarwal invest in securities issued by government-owned firms and private sector companies that come with strong financials. And it prefers those that come with up to a three-year maturity.

Corporate bond funds such as SCBF held their ground in the wake of the credit crisis. After liquid funds, this is the second biggest category among debt schemes.

SCBF has managed to avoid credit events. It allocates 10-20 percent in government securities depending on the interest rate outlook. At a corpus size of Rs 1,144 crore (as on June 30, 2021), the scheme is well-diversified with close to 51 securities. Maintaining the right maturity profile and sticking to securities whenever the spreads are attractive have helped the fund outperform its category across timeframes.

HDFC Corporate Bond Fund

HDFC Corporate Bond Fund (HCBF) is the second largest fund in its category with assets of close to Rs 26,698 crore (as on June 30, 2021). Multiple credit events have led to flight-to-safety moves among debt fund investors. And larger fund houses with a good brand names such as HDFC AMC have benefitted from increased inflows. And HCBF has rewarded investors with its good performance.

Despite SEBI’s minor leeway that allows schemes to invest up to 20 percent in lower-rated assets, HCBF has consistently deployed nearly all its corpus in highly-rated (AA+ and above) securities. Its prudent risk control strategy helped HCBF navigate the debt fund crisis, successfully. Anupam Joshi has been its fund manager since 2015.

HCBF aims to generate returns mainly through interest accruals, Joshi tells us. Allocating some portion to an active duration strategy helps the fund to gain from interest rate movements.

Also see: The complete MC30 basket of mutual fund schemes

Equity - Passive

Nippon India ETF Nifty BeES

Nippon India ETF Nifty BeES (N50B) is India’s oldest exchange-traded fund (ETF) that originally belonged to Benchmark MF. It is also among the most liquid ETFs.

N50B invests its entire corpus in Nifty 50 stocks, that too in the same proportion as the benchmark. An ETF’s tracking error is typically lower than that of an index fund. But many ETFs suffer from low liquidity and this pushes up the impact cost; investors don’t always get the price that’s closest to the scheme’s net asset value (NAV). Here is where N50B scores. It’s the most liquid ETF in the Indian markets. You need a demat account to invest in ETFs.

Also read: MC30: The methodology behind the curated basket of mutual fund schemes

UTI Nifty Index Fund

If you do not have a demat account, then you can invest in UTI Nifty Index Fund (UBIF). Launched in 2000, this was India’s first Nifty-based index fund.

It invests in stocks of the Nifty 50 in exactly the same proportion as they lie in the benchmark index. UBIF’s tracking error has consistently been the least among index funds. Its expense ratio is also low, which bodes well for a passively-managed fund. At a corpus size of about Rs 4,211 crore, it is one of the largest in its space.

ICICI Prudential Nifty Next 50 Index Fund

The Nifty Next50 index is one of the most consistent and among the best-performing diversified indices around. It consists of the 50 most liquid companies outside the Nifty 50 index. If you like to eliminate fund manager risks and reduce the chances of underperformance, then a combination of Nifty 50 and Nifty Next 50 index funds is good enough for your large-cap allocation.

ICICI Prudential Nifty Next 50 index fund (INN50) has been a consistently delivering index fund.

Over the last 10-year period, the Nifty Next 50 TRI delivered 14.5 percent returns. The Nifty 50 TRI gave 12 percent. Although the Nifty Next 50 index can be a bit more volatile than the Nifty 50 index, the former has been more consistent. A look at how major diversified indices have performed in each of the past 10 calendar years tells us that in four of these 10 years, Nifty 50 gave the maximum return of all the indices, but also fell four times. The Nifty Next 50 index scored the maximum return once, but also gave the least returns just twice.

Motilal Oswal NASDAQ 100 ETF

In the past two years, international funds have become popular. And many fund houses have rolled out a variety of foreign schemes: those that invest in the US or European stocks, emerging markets, specific countries or even companies bound by a common theme.

Typically, your first international fund ought to be one that invests in the US because of the variety of companies available and their liquidity. Motilal Oswal NASDAQ 100 ETF (MNAS100ETF) is an ideal vehicle in this regard. It invests in companies that are part of the NASDAQ 100 Index. There are companies across computer hardware, and software, telecommunications, retail/wholesale trade and biotechnology industries in there.

The fund also gives you an opportunity to invest in companies whose products we use almost every day. Apple, Microsoft, Alphabet, Intel, Facebook, Amazon, Tesla, Comcast and Paypal are some examples. The index has a low correlation to Indian equities. This can smoothen the volatility of your portfolio returns. And investing in foreign currency is also a good way to save up for your child’s foreign education, if that is one of your goals. The only concern about the NASDAQ 100 index is that around 44 percent of its allocation is to technology stocks. But overall, there is good diversification. Its expense ratio is low, at 0.56 percent.

Nippon India Gold BeES

Gold plays an important role in our portfolio, as the asset class helps us diversify beyond equity and debt. And Nippon India Gold BeES (Gold BeES), India’s oldest gold ETF, is just the fund we recommend.

Gold ETF is a cost-efficient and convenient way for investment purposes. These are mutual fund schemes aiming to track the domestic physical gold’s price. After rising through 2019 and 2020, gold prices fell more than four percent from their August 2020 highs. Don’t invest in gold from a returns perspective, but more as a hedge against inflation. Gold fortifies your portfolio periods of slowing economy.

Now, gold BeES comes with a low tracking error and sufficient liquidity. Invest around 5-10 percent of your portfolio in Gold BeES.

Also see: The complete MC30 basket of mutual fund schemes

Also read: How to use MC30?

Also read: MC30: The methodology behind the curated basket of mutual fund schemes

Kayezad E Adajania
Kayezad E Adajania heads the personal finance bureau at Moneycontrol. He has been covering mutual funds and personal finance for the past two decades, having worked in Mint and Outlook Money magazine. Kayezad was the founding member of Mint’s personal finance team when it was set up in 2009.
Dhuraivel Gunasekaran
Dhuraivel Gunasekaran
first published: Jul 10, 2021 10:40 pm