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These funds have done well over the long pull while beating peers in bear markets.
Best performing Mutual Funds for a Year-To-Date period, with highest Percent Change. The 10 Best Mutual Funds to Buy for 2018 – Vanguard Energy Fund (VGENX) VGENX is heavy in integrated and upstream oil & gas firms including Exxon Mobil Corporation (NYSE: XOM) and Chevron Corporation (NYSE: CVX ), but also offers a little exposure to refining, equipment and storage plays too.
We evaluated 1,261 domestic stock funds. Twenty-six were good enough to make our Honor Roll. The select list includes some familiar names, like Vanguard Primecap and Fidelity Contrafund, and some less familiar ones like Parnassus Core Equity.
Honor Roll members cleared three hurdles.
They had to beat the stock market over three market cycles going back to October 2002. They had to hold up comparatively well in down markets, earning an A+ or A. They had to keep their expenses to a reasonable level: below the 1.5% median for this collection of mutual funds.
Why the focus on down-market performance? One reason is that markets have mostly gone up over the past 16 years. Stock prices are high, at 31 times historical earnings (as economist Robert Shiller defines them in his ten-year average). So there’s an accentuated risk of a bear market over the next several years. The mild correction this autumn may be the beginning of something worse.
The other reason for highlighting defensive funds is that mutual fund investors are terrible at market timing. Some of them get lured into a fund (or into the market) after a bullish stretch. They buy at the top, that is. Then the bear arrives and they are distressed. They sell at the bottom.
Not everyone invests this badly, but enough do that the average return enjoyed by a fund owner is considerably less than the average return enjoyed by hypothetical buy-and-hold investors. Paying more attention to bear-market performance would diminish the problem.
The A+/A requirement is moderately strict, demanding only that a fund land in the top quartile for bear market results. In our formula, consistency is rewarded; a fund that did spectacularly well in one of the three down-market intervals, and only so-so in the other two, won’t get an A.
'>These funds have done well over the long pull while beating peers in bear markets.
We evaluated 1,261 domestic stock funds. Twenty-six were good enough to make our Honor Roll. The select list includes some familiar names, like Vanguard Primecap and Fidelity Contrafund, and some less familiar ones like Parnassus Core Equity.
Honor Roll members cleared three hurdles.
They had to beat the stock market over three market cycles going back to October 2002. They had to hold up comparatively well in down markets, earning an A+ or A. They had to keep their expenses to a reasonable level: below the 1.5% median for this collection of mutual funds.
Why the focus on down-market performance? One reason is that markets have mostly gone up over the past 16 years. Stock prices are high, at 31 times historical earnings (as economist Robert Shiller defines them in his ten-year average). So there’s an accentuated risk of a bear market over the next several years. The mild correction this autumn may be the beginning of something worse.
The other reason for highlighting defensive funds is that mutual fund investors are terrible at market timing. Some of them get lured into a fund (or into the market) after a bullish stretch. They buy at the top, that is. Then the bear arrives and they are distressed. They sell at the bottom.
Not everyone invests this badly, but enough do that the average return enjoyed by a fund owner is considerably less than the average return enjoyed by hypothetical buy-and-hold investors. Paying more attention to bear-market performance would diminish the problem.
The A+/A requirement is moderately strict, demanding only that a fund land in the top quartile for bear market results. In our formula, consistency is rewarded; a fund that did spectacularly well in one of the three down-market intervals, and only so-so in the other two, won’t get an A.
There are no changes in our equity mutual fund SIP portfolios this month
Updated: Nov 16, 2018, 12.13 PM IST
Here is our update on our equity mutual fund SIP portfolio recommendations in November. And the the happy news is that there are no changes in these portfolios. ET.com Mutual Funds launched its recommended equity mutual fund portfolios to invest through SIPs in October 2016. Since then, we have been closely monitoring the schemes in the portfolios and coming out with an update in the first week of every month.
Our reason to launch these portfolios was simple. We know that many investors find it very difficult to stitch together a few schemes (or create a mutual fund portfolio, in technical parlance) that would help them to meet their various long-term financial goals. This is especially true for new investors.
Sure, creating a mutual fund portfolio involves several complicated steps. To begin with, an investor should shortlist a few schemes with a consistent long-term performance record. Then s/he should pick the ones that are in line with their risk profile and investment objectives. Then the biggest problem: how to fix the composition of the portfolio? The task doesn’t end here. They also need to monitor and review the performance of the portfolio regularly and take remedial steps if needed.
That is why ET.com Mutual Funds decided to launch equity mutual fund SIP portfolios. We have created equity mutual fund SIP portfolios for three different individual risk profiles: conservative, moderate and aggressive. We have also considered three SIP baskets – between Rs 2,000-5,000, between Rs 5,000-10,000 and above Rs 10,000 – while creating these portfolios. These are the schemes that made it into our recommendation:
Recommended portfolios for conservative investors
SIP amount | Scheme name | Percentage |
Rs 2,000 to 5,000 | SBI Bluechip Fund | 50 |
ICICI Prudential Regular Savings Fund | 50 | |
Rs 5,000 to 10,000 | SBI Bluechip Fund | 30 |
ICICI Prudential Bluechip Fund | 20 | |
UTI Regular Savings Fund | 50 | |
Above Rs 10,000 | SBI Bluechip Fund | 25 |
ICICI Prudential Bluechip Fund | 15 | |
Motilal Oswal Multicap 35 Fund | 10 | |
UTI Regular Savings Fund | 50 |
Recommended portfolios for moderate investors
SIP amount | Scheme name | Percentage |
Rs 2,000 to 5,000 | SBI Bluechip Fund | 65 |
ICICI Prudential Regular Savings Fund | 35 | |
Rs 5,000 to 10,000 | SBI Bluechip Fund | 40 |
Motilal Oswal Multicap 35 Fund | 25 | |
ICICI Prudential Regular Savings Fund | 35 | |
Above Rs 10,000 | ICICI Prudential Bluechip Fund | 30 |
SBI Bluechip Fund | 15 | |
Motilal Oswal Multicap 35 Fund | 20 | |
UTI Regular Savings Fund | 35 |
Recommended portfolios for aggressive investors
SIP amount | Scheme name | Percentage |
Rs 2,000 to 5,000 | SBI Magnum Multicap Fund | 50 |
ICICI Prudential Bluechip Fund | 50 | |
Rs 5,000 to 10,000 | Motilal Oswal Multicap 35 Fund | 30 |
SBI Bluechip Fund | 20 | |
ICICI Prudential Equity & Debt Fund | 15 | |
Mirae Asset Emerging Bluechip Fund | 35 | |
Above Rs 10,000 | ICICI Prudential Bluechip Fund | 35 |
SBI Magnum Multicap Fund | 10 | |
Mirae Asset Emerging Bluechip Fund | 30 | |
ICICI Prudential Equity & Debt Fund | 10 | |
Tata Equity PE Fund | 15 |
Note, we have assumed that the investor is investing with an investment horizon of at least five years.
Here is our methodology:
Methodology for equity funds:
ET.com Mutual Funds has employed the following parameters for shortlisting the equity mutual fund schemes.
1. Mean rolling returns: Rolled daily for the last three years.
2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.
i) When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.
ii) When H is less than 0.5, the series is said to be mean reverting.
iii) When H is greater than 0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series
3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.
X =Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z
4. Outperformance: It is measured by Jensen's Alpha for the last three years. Jensen's Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.
Average returns generated by the MF Scheme =
[Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free Rate}
5. Asset size: For Equity funds, the threshold asset size is Rs 50 crore
Methodology for debt funds:
ET.com Mutual Funds has employed the following parameters for shortlisting the debt mutual fund schemes.
1. Mean rolling returns: Rolled daily for the last three years.
2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.
i) When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.
ii) When H is less than 0.5, the series is said to be mean reverting.
iii) When H is greater than 0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series
3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.
X =Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z
4. Outperformance: Fund Return – Benchmark return. Rolling returns rolled daily is used for computing the return of the fund and the benchmark and subsequently the Active return of the fund.
Asset size: For Debt funds, the threshold asset size is Rs 50 crore
Methodology for hybrid funds:
ET.com Mutual Funds has employed the following parameters for shortlisting the hybrid mutual fund schemes.
1. Mean rolling returns: Rolled daily for the last three years.
2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.
i) When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.
ii) When H <0.5, the series is said to be mean reverting.
iii) When H>0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series
3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.
X = Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z
4. Outperformance
i) Equity portion: It is measured by Jensen's Alpha for the last three years. Jensen's Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.
Average returns generated by the MF Scheme =
[Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free Rate}
ii) Debt portion: Fund Return – Benchmark return. Rolling returns rolled daily is used for computing the return of the fund and the benchmark and subsequently the Active return of the fund.
5. Asset size: For Hybrid funds, the threshold asset size is Rs 50 crore
(Disclaimer: past performance is no guarantee for future performance.)