The Assets under Management (AUM) of one of the biggest small cap fund is more than Rs 10,000 Crores. The fund holds 67 stocks in its portfolio.
Can you guess how many of these 67 stocks are worth investing?
As per our Giga Trading Engine which evaluates over 20 million data points daily, only 8 among these 67 stocks are worth investing! That’s only 11.94% of the portfolio.
But still, this small cap fund enjoys a 4-star rating across majority of mutual fund ‘research’ platforms.
Another popular large-cap fund has a massive AUM of more than Rs 27,000 Crores! The fund invests in a total of 61 stocks. Of these, only 20 stocks are worth investing as per our Giga trading engine.
And the list goes on.
In the meanwhile, deserving funds such as UTI Mastershare Unit Scheme is managing a disappointing AUM of Rs 7,500 Crores only!
Do you often wonder that you do everything right but still end up making mediocre returns?
You maintain investment discipline, invest in only 5-star rated funds and yet your returns are disappointing.
You blame it on the markets and your luck. But what if your biggest investment flaw is not that you invested in a poor quality fund.
Your biggest mistake is that post investment, you never bothered to review your mutual funds!
You probably thought that since you invested in 5-star rated funds, that you found online, there was no need to review them. ‘Once a 5-star rated fund always a 5-star rated fund. Right?’
Before we reveal why your logic is flawed, tell me something, ‘Why are you making mediocre returns in a 5-star rated fund?’
The reason you are earning mediocre returns is because you are selecting funds using technology which is more than 3 decades old!
But do you know what’s worse than investing in a poor quality fund?
Staying invested in a poor quality fund even after knowing that it’s a bad fund!
There are numerous reasons why investors stay invested in bad funds:
• Lack of knowledge or time to shift to better quality funds.
• Not reviewing mutual fund portfolio from time to time.
• Fixation with past performance of the fund.
• Over reliance on free online star ratings and research.
• Waiting to break-even
• Wishful thinking
The last two reasons are the worst. Investors believe that the fund will magically start performing and that they will at least break-even. ‘Something is better than nothing’ they would argue.
But at what cost?
The below comparison will help you understand how you can lose a fortune by not reviewing your mutual fund portfolio regularly.
On 1st April 2010, both Ram and Shyam invested Rs 1 lakh in a small cap fund. Let’s call this fund ‘A’. They planned to stay invested in the fund for 10 years.After 3 years i.e. on 1st April 2013, Shyam decides to review the fund’s performance. This was the fund’s position on 1st April 2013.
|Investment Amount (Rs)||1,00,000||1,00,000|
|NAV as on 1st April 2010||13.81||13.81|
|NAV as on 1st April 2013||14.79||14.79|
|Current Value as on 1st April 2013 (Rs)||1,07,096||1,07,096|
In 3 years, both Ram and Shyam had earned only 2.31%! That’s worse than a bank fixed deposit. Looking at the fund’s abysmal performance of 2.31% in 3 years, Shyam decides to switch to a better small cap fund for the remaining 7 years. Let’s call this fund ‘B’.
Unfortunately, Ram never bothers to review his portfolio. Even after getting only 2.31% in 3 years, Ram continues to stay invested in fund A for the remaining 7 years.This is their position after 10 years.
|Investment in||Fund A||Fund B|
|NAV as on 1st April 2020||25.82||40.37|
|Current Value of Investment||1,86,966||3,58,497|
As you can see, Ram’s Rs 1 Lakh grew to Rs 1.86 Lakhs. Whereas Shyam’s Rs 1 Lakh grew to Rs 3.58 Lakhs! There is an absolute difference of 91.74% between both their corpuses.
Shyam was not a genius. He invested the same amount and for the same time period as Ram. Yet Shyam ended up with 90% more money than Ram.
All because he evaluated the fund’s performance and ‘SWITCHED to the right fund at the right time!
Ram is all of us. We invest in a fund looking at online ‘star ratings’ and then never bother to review the fund. This laziness in reviewing our portfolio ends up costing us a fortune!
To avoid Ram’s fate, it is recommended to review and rebalance your mutual fund portfolio every year or as and when there is a major change in fund’s investment strategy.
Like Ram, if you too are stuck with poor quality funds, then do not lose hope. There is a way to switch from mediocre funds to superior quality funds - SmartSwitch.
What is RankMF’s SmartSwitch?
SmartSwitch does exactly as its name suggests. It reviews your mutual fund portfolio and recommends you to ‘Smartly’ switch from poor quality funds to superior quality funds.
SmartSwitch runs on a proprietary research engine which evaluates more than 20 million data points’ every day! Based on the score generated by the research engine, SmartSwitch tells you which funds you should switch out of immediately and where to reinvest for superior returns.
All this is done at a single click!
SmartSwitch works in 3 Steps:
1. Upload CAS & Evaluate: In the first step, you simply need to upload your latest CAS statement. SmartSwitch’s algorithm will rate and rank all the mutual funds in your portfolio based on 20 million parameters in seconds!
2. SmartSwitch’s Smart Recommendations: In the second step, SmartSwitch will recommend you to switch out from poor quality funds to superior quality funds if any. It will also provide you detailed explanation behind the recommendations. Remember, SmartSwitch will not touch good quality funds.
3. Implementation of the Recommendations: You can implement the recommended switching from RankMF portal itself at one click! From advice to execution, RankMF ensures that portfolio reviewing is a quick and stress-free activity for you.
RankMF’s SmartSwitch is the perfect tool to help you get rid of mediocre mutual funds. SmartSwitch has the ability to help you earn higher returns by investing in the best mutual fund schemes.
There are many more such schemes which have high AUMs but their underlying portfolio is disappointing. Are you invested in any such funds? Are you waiting for a turnaround in the fund like Ram? Ask yourself, at what cost?
Cut short your losses and find out if you are investing in poor quality funds for absolutely FREE!
As mentioned earlier, SmartSwitch is 100% FREE and the trigger is always in your hands. SmartSwitch will only give you switch recommendation backed by solid research. Whether you want to switch or stay invested in mediocre funds is your decision.
It’s time to say goodbye to mediocre mutual fund returns with RankMF’s SmartSwitch.
But if you still want to stay invested in mediocre funds, well then you have something else to blame for your mediocre returns other than bad luck!
Decide wisely and invest in ONLY the best mutual funds in India with RankMF’s SmartSwitch.
This is a partnered post