My MF selection methodology is starts with defining the different investment objectives that my readers may have. Then I look at the size of the fund – the amount of total investor money the fund is managing (called Assets under management) – as per me, the bigger the fund size, the more likely it will have a better fund management team and better governance. Then I look at the past history of performance.
So here are my current quarterly recommendations (April -June 2018):
If you are looking for growth in capital for long term (3 years or more investment timeframe):
Moderate risk and moderate return – Kotak Select Focus fund and SBI Blue Chip Fund and Aditya Birla Sun Life Frontline equity fund . All these funds manage large amount of investor money and have given 15% plus per annum compounded over the past five years. These funds invest in the stocks of large cap companies in India and as long as the Indian economy and GDP is growing, the fund is expected to do well.
Slightly higher risk and higher return – HDFC Mid cap opportunities fund – this fund manages appx 15000 crore investor money and has given 25% per annum compounded over five years. This fund invests in stocks mid cap and small cap companies.
There are also some industry specific themes that would do well in 2018 -19. I believe that Infrastrucutre, Rural theme and FMCG industries whould give good returns in 2018-19. The funds for these themes are L&T Infrastructure fund, Sundaram Rural India Fund and SBI FMCG Fund.
Low risk and reasonable return – HDFC Prudence fund (click here) – this fund manages 27000 crores of investor money. It has given 17% per annum compounded over the past five years and it has 65% -70% of it’s money invested in equity markets and remaining 30% in bonds.
Really low risk and OK with low returns – You can look at fixed deposits – here you get 6.5 -7% returns (and this interest is taxed).
If you are looking for growth in capital but for shorter term (between 1 and 3 years) – the look at arbitrage funds – they will be better than FD’s and I would recommend that you look at ICICI Pru equity arbitrage fund.
If you are looking for preservation of capital and some returns better than FD – Invest in HDFC MIP -Long term plan(click here) – this fund manages 3500 crore worth of investor money. It has appx 20% of this amount in stocks and the rest 80% in bonds. In the past it has given 9-10% per annum compounded and is expected to give the same.
If you are looking to avail tax savings under Section 80C – then invest in Reliance Tax saver (ELSS) fund (Read more) – this fund manages 8000 crores of investor money and has given 14% per annum over a three year period in the past. As you are investing for section 80C tax savings, you need to stay invested for three years.