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5 Reasons Why Mutual Funds are giving Better Returns still in 2022
The markets continue to stay overheated, however, some mutual funds continue to provide superior returns. It is a well-known strategy to stay invested in bluechip funds whilst the markets seem volatile or overheated. Bluechip funds invest in very large and stable companies that have a history of staying put and offering stability to the portfolio during high volatility. Mutual fund schemes such asMirae Asset Emerging Bluechip Fund, also commonly calledMirae Asset Bluechip Fundcontinue to provide optimal returns due to their predominant exposure to large-cap stocks. Here are reasons why some mutual funds continue to offer better returns than their counterparts. Relatively safer mutual funds: Bluechip funds are considered to be relatively safer when compared to other funds which invest in companies that have survived through rough times in the past. Investing in these types of mutual funds offers stability to the overall portfolio. They enable better diversification and efficiently contribute to risk reduction. To invest inMirae Asset Emerging Bluechip Fundis synonymous with insulating your portfolio against severe downsides in the future. Has remained muted over the past 2 years: The bluechip category has remained muted over the past 2 years, true to its nature of not being outperformers during the market uptrend.Mirae Asset Bluechip fundhas posted steady returns in line with the category average (in fact outperforming them on most occasions). This is as expected, however, in comparison with other category funds which are intended to outperform in an up-trending market, they may seem to have posted muted performance. This also provides a clue that the valuations of the stocks thatMirae Asset Bluechip fundinvests in may be reasonably valued as compared to those which have had a dream run over the past 2 years. This makes it more conducive for investors to look atMirae Asset Emerging Bluechip Fundat this point. Reputed fund house and historical fund performance: Like in all other cases, it is important to assess the fund house and fund performance before we commit our funds to the same. This fund house began its journey in India, the same year when many foreign AMCs exited India. In the year 2006, Mirae set up its business in India, they in a true sense were able to buy into a market that had corrected sharply and was lying low in 2008. By the year 2014, it established its journey to profitability and is now counted among the fastest-growing businesses. Their ability to catch the pulse of emerging markets has enabled them to stay on top of their game.Mirae Asset Emerging bluechip fundis among the best performing fund within the category. Over a horizon of 5 years, the fund performance stands at 22.71% p.a returns vis-Ã -vis the benchmark returns of ~19.38% (as of 12 Apr. 22). Incremental exposures to stable funds: Volatile times call for reduced volatility, theMirae Asset Emerging Bluechip fundis benchmarked against Nifty Large Mid Cap 250 TRI and has managed to outperform the benchmark significantly. The alpha of approximately 6%+ (5 years) is the highest among peers and it has a standard deviation (a measure of risk) of 21.8% which is lower than the peers. Hence, ensuring that the alpha (optimal return) is achieved at lower risk levels. As the markets show continued signs of increased volatility, it is important to increase exposure to stable funds. Incremental exposure toward bluechip funds in an overheated market or volatile market can proactively insulate the portfolio. Alignment to long term financial goals: Funds such asMirae Asset Emerging Bluechip FundorMirae Asset Bluechip fundalign perfectly with long term financial goals. These goals can be passively managed without frequent realignment. Investment in bluechip funds can be left to grow over the long haul with intermediate monitoring only to ensure that they continue to outperform their respective in their category.Invest in Mirae Asset Emerging Bluechip Fundif you are planning for any long term goal, it will help you achieve the required corpus in a stress-free manner.
Are multi-cap funds better than large-cap funds?
There are a host of choices available to an investor today, with multi-cap, flexicap and the good old largecap, midcap and smallcap funds. Many of us are not aware of the nuances of the new category of funds especially the subtle difference between the multicap andflexicap funds is often blurred. The mandate by SEBI formulticap fundswhich was issued in September 2020 indicated the lack of flexibility in the movement of funds across different market-cap stocks. This mandate insisted that themulticap fundsshould hold a minimum of 25% assets in large, mid and small-cap segments. Many of themulticap fundshave a greater exposure toward largecap stocks at this point. How does this placemulticap fundsagainst other categories? Let’s find out! Multicap funds vs.flexicap fundsvs. largecap funds Multicap fundsandflexicap fundshave exposure across the market cap, however, they differ in the manner in which they gain exposure to various market caps. Multicap fundsare mandated by SEBI to hold a diversified equity-oriented portfolio that spans large, mid and small caps companies. As per the mandate, they are required to invest at least 75% of the assets in equities/equity-oriented securities with at least 25% of funds in each of the market cap categories, namely, largecap, midcap and smallcap. Irrespective of the market direction, themulticap fundis required to hold the exposure as per the mandate. This fund, however, offers the best of both worlds, where the addition of amulticap fundin your portfolio offers the stability which is offered by largecap exposure and the potential upside which comes from the midcap and smallcap exposure. The fund manager needs to make a conscious effort at the beginning to gain exposure to the best quality of stocks within each of the market caps, they have limited capacity to swing their allocation from one segment to another based on market direction. Most of the multi caps have greater exposure in largecap stocks and hold the mandated exposure in midcap and small-cap companies. On the other hand,flexicap fundsoffer the fund manager greater scope for swing allocation based on market movement. Flexicap fundis a dynamic equity scheme, they can invest across market caps, the mandate specifies that at least a minimum of 65% of the assets have to be invested in equity-related securities. There is no individual threshold on the investment towards largecap, midcap and smallcap. The exposure is usually managed dynamically depending upon market conditions. Choosing thebest flexicap fundcan be quite tricky and the experience of the fund manager across all types of the market cycle can come into play more significantly. The fund manager has more flexibility and hence, can explore various investment opportunities. Some of thebest flexicap fundspursue both value and growth stocks, many fund managers move across investing styles and philosophies to generate optimal returns. Largecap funds are the relatively safer bets which offer exposure to relatively stable stocks. Here is how they differ from the multicap andflexicap fundcategories. The mandate expects them to invest at least 65% of the assets into largecap stocks, any incremental exposure will also be into the select set of the universe which falls within the largecap space The fund manager has ample flexibility to move within this segment, however, cannot swing across other segments when the market direction demands such an action Typically, largecap stocks are extremely stable and offer steady returns, they work well during a downward trending market. However, during the upward trending market, they lag due to the lack of exposure to other categories. It can thus be gathered that each of these categories of funds works well for different investment goals and at different points in time. If as an investor you intend to have a fund that dynamically invests across market caps, then you should scout for thebest flexicap fund. Look for a fund that has a good track record across market cycles. If you have a passive attitude towards investing and want exposure to all the market caps but don’t want any increased risk exposure at any point, thenmulticap fundswould be suitable. And finally, if you are a conservative investor, then your good old largecap funds are a good place to start.
How to pick the best debt fund in 2022?
Debt mutual funds are a great investment option if you are looking for investments that can generate reasonable returns along with provide a steady flow of income. Generally, debt funds invest in various fixed income-bearing securities such as government securities, treasury bills, corporate bonds, certificates of deposits, commercial papers, and money market instruments. Debt funds come in many varieties depending on the type and maturity tenure of underlying securities. Though debt funds are relatively less risky than equity mutual funds, to generate good returns fromdebt mutual fundsyou need to make a wise choice. Here are some important points to consider to picking the best debt fund in 2022: Funds historic performance: When selecting a debt fund, it is important to know the consistency of performance of that fund. You need to compare the performance of the fund and its consistency with the peer funds in the same category. You need to also check whether the fund has outperformed the benchmark or not. When it comes to mutual funds, it is important to keep in mind that past performance is not an indication of future performance. However, it is an important element to be considered while making investment choices. Always match the fund’s performance with its suitability to your investment needs, risk profile, and time horizon. Compare the performance of the debt funds in India based on the type of debt fund that is suitable for your investment goals with the peer funds in the same category and with the benchmark. Comparison can be easily done online to choose the best debt fund for 2022. Fund manager’s track record: Along with the fund’s historic performance, it is also important to know the track record of the fund manager. Know the experience of the fund manager and how the funds managed by them have performed over the years. Expense Ratio: The expense ratio indicates the percentage of your investment that goes towards administration or as an annual maintenance charge levied by the mutual fund. If the expense ratio is high, it will have a huge impact on the returns that you take home. Hence, always ensure to go with funds that have lower expenses ratio. Funds with lower expenses ratio have a higher potential to deliver superior returns. Fund’s maturity: When it comes to picking the best debt mutual fund, you need to consider the fund’s maturity. As debt funds invest in debt securities that come with a maturity date, it becomes important for you to match the maturity dates or investment horizons of underlying securities of the fund with the time frame you have for achieving your desired goal. You might have to incur a risk of loss by not paying attention to the maturity period of the fund. For example, if you are looking to invest for short-term goals that are just 6 months away, you can choose short-duration debt funds instead of choosing long-duration debt funds. Interest rate fluctuations: Though debt mutual funds are not highly impacted by the market, there are risks of interest rate fluctuations that can hugely affect the performance of debt mutual funds in India. Keep the interest fluctuations in mind while choosing the best debt mutual funds to invest in 2022. Rating of the fund: As debt funds predominately invest in debt securities, there is a credit risk that can affect the performance of the debt fund. The credit quality rating of the fund needs to be considered while picking the bestdebt mutual fund in India. Fund with AAA rating is considered to highest possible, stable, and strong debt securities in its portfolio. Hence, such funds can deliver stable returns. Along with all the above elements, it is extremely important to choose the investments based on your financial need, time horizon to achieve your goals and risk appetite. Make a wise choice based on your investment need.