The capital markets, globally, have been quite volatile during the current calendar year and are likely to remain so in coming times on account of various factors such as US Fed rate hikes, volatile oil prices, intensifying trade conflicts and sanctions.
Though the Indian financial markets have also been affected by these factors, the volatility during the current Fiscal (up to mid December) is among the lowest compared to some major developed and emerging markets.
Thanks to the aggressive marketing campaigns by the Mutual fund regulator(s), Fund houses and intermediaries, the fund flows into Mutual Fund Schemes have been growing positively, over the last few years.
2018 has been an eventful year for Mutual fund industry. SEBI has implemented quite a few new regulations. The important one being, re-classification or re-categorization of Mutual Funds.
Every year, I publish a review of best and top rated mutual fund schemes that can be considered for long-term wealth creation.
In this post, let’s analyze the best & top mutual fund schemes to invest in 2019-20. Which are the Top rated Mutual Funds to invest for long term in 2019? Best SIP Equity Funds for 2019. Let’s discuss….
Best & Top Mutual Fund Schemes for 2019
I have considered both, the past performance and risk ratios of mutual funds to shortlist top rated Equity mutual fund schemes.
Below image gives you an idea on the parameters (to know, how consistent the funds have been..?) that one can consider while shortlisting right mutual fund schemes.
The best & top Mutual Fund Schemes to invest in India for 2019-20 under various Equity Fund Categories are as below;
- ICICI Prudential Bluechip Fund (Large-cap)
- Aditya Birla Sun Life Frontline Equity Fund (Large-cap)
- SBI Bluechip Fund (Large-cap)
- Franklin India Equity Fund (Diversified)
- Mirae Asset India Equity Fund (Diversified)
- Aditya Birla Sun Life Equity Fund (Diversified)
- Franklin India Prima Fund (Mid-cap)
- HDFC Mid-cap Opportunities Fund (Mid-cap)
- Franklin Smaller Companies Fund (Small-cap)
- Franklin India Taxshield Fund (ELSS – Tax Saving)
- Axis Long Term Equity Fund (ELSS – Tax Saving)
- Aditya Birla Sun Life Tax Relief ’96 Fund (ELSS – Tax Saving)
Let’s analyse category-wise best equity funds;
Best Performing Large Cap Mutual Fund Schemes 2019
Based on the past performance, I have short-listed below large-cap funds for the review;
The various important risk ratios of these Large cap funds are as below;
The final list of best Large Cap Equity Funds as per my analysis are; ICICI Prudential Bluechip Fund, Aditya Birla Sun Life Frontline Equity Fund & SBI Bluechip Fund.
- Past Returns : The returns generated on these three funds in the last 10 years have been in the range of 17 to 19%.
- Category Returns & Risk : The funds ICICI Pru Bluechip & Birla Frontline Equity have relatively ‘LOWER’ risk profile when compared to its category peers.
- Portfolio Allocation : Post the SEBI reclassification, these funds have tweaked their mandate to maintain a minimum 80 per cent exposure to the top 100 stocks by market cap.
- You may also consider other large-cap funds like Franklin Bluechip Fund & Index fund like UTI Nifty Fund.
Best Multi-cap Mutual Fund Schemes 2019
Based on the past performance, I have short-listed below Multi-cap funds for the review;
The various important risk ratios of these Diversified Equity funds are as below;
The final list of best Multi-Cap Equity Funds as per my analysis are; Franklin India Equity Fund, Mirae Asset India Equity Fund & Aditya Birla Equity Fund.
- Past Returns : The returns generated by these three funds in the last 10 years have been in the range of 18 to 22%. Mirae & Birla Equity Funds can be relatively considered as ‘high risk- high return’ ones.
- Category Returns & Risk : The Mirae Fund returns vs category returns are on the ‘higher’ side, whereas, the fund risk vs category risk parameter is ‘average’.
- Portfolio Allocation : The Mirae Fund currently has an allocation of 87% of its corpus in large-cap stocks. Birla Equity Fund has an allocation of around 30% of its corpus in Mid-cap stocks.
- You may keep an eye on Kotak Standard Multi-cap fund as well.
Latest update (08-Apr-2019) : Mirae India Equity fund has now become a Lage-cap oriented Fund.
Best Mid/Small Cap Mutual Fund Schemes 2019
Based on the past performance, I have short-listed below Mid-cap for the review;
The various important risk ratios of the above Mid-cap oriented Equity funds are as below;
The final list of best Mid-cap Funds as per my analysis are; Franklin India Prima Fund, HDFC Mid-cap Opportunities Fund & Franklin Smaller Companies Fund (Small-cap Fund).
- Past Returns : The returns generated by these three funds in the last 3 years have been around just 10%. Most of the popular mid/small cap funds have seen deep correction in this Calender year. But, the returns generated in the last 5 to 10 years have been exceptional.
- Category Returns & Risk : Franklin Prima and Smaller Companies fund have relatively lower risk profile than their peers and have generated decent returns. Franklin Prima Fund & HDFC Mid-cap funds have an allocation of around 77% & 84% of their corpuses to mid-cap stocks.
- Portfolio Allocation & Analysis :
- Franklin Prima fund has consistently outpaced its benchmark for the last eight years. While it hasn’t outpaced its peers on a year on year basis, it has been a big wealth creator over four market cycles, with a 21% CAGR since launch. Mid-caps have always made up 65 to 70% of assets. This is higher than the category allocation towards mid-caps.
- While many mid-cap funds have struggled to beat their benchmarks in the last one year, HDFC Mid-cap fund has held up better. However, popularity has resulted in a rapid burgeoning of the fund’s size, from under Rs 10,000 crore in early 2016 to over Rs 19,000 crore now. This makes it by far the largest fund in this category.
- A focus on hard core fundamentals makes Franklin India Smaller Companies Fund a good pick for investors to avoid the big mistakes of small-cap investing. For the last 10 years and over two whole market cycles, the fund has demonstrated a consistent ability to deliver benchmark-beating
- You may keep an eye on the performance of L&T Mid cap fund as well.
Best ELSS Tax Saving Mutual Funds to invest in 2019
Based on the past performance, I have short-listed below ELSS funds for the review;
The various important risk ratios of the above ELSS Tax Saving funds are as below;
The final list of best ELSS Funds as per my analysis are; Franklin Taxshield, Axis Long Term Equity Fund & Aditya Birla Tax Relief ’96 Fund.
- Past Returns : The returns generated by these Franklin Tax shield & Birla Tax relief funds in the last 10 years have been better than some of the best Mid-cap funds.
- Category Returns & Risk : Franklin Taxshield has been very consistent with its performance. Axis LTE Fund has a very good ‘risk – return’ profile.
- Portfolio Allocation & Analysis :
- Franklin Taxshield has been maintaining a very high allocation to large-cap stocks across market phases. The fund’s returns in the last one year show a slowdown relative to the category and benchmark. The fund’s year-to-year returns don’t always beat its more aggressive peers, but its performance adds up to very handsome returns over the long term. You may consider this fund, if you like a less bumpy ride in choppy markets.
- Axis LTE fund, being a later entrant, managed to skip the bear market of 2008 and thus hasn’t really been tested in a severe market meltdown. Its performance in 2011, however, showed an ability to contain losses in a falling market. It has delivered convincing out-performance of both its benchmark and peers in most bull years – be it 2010, 2013 or 2014.
- Birla Tax Relief fund has been consistently overweight on mid-caps relative to the category.
- You may keep an eye on DSP Tax Saver Fund, Quantum Tax Savings Fund & Invesco India Tax Plan Fund.
Best Hyrbid Equity (Balanced) Funds 2019
Based on the past performance, I have short-listed below Hybrid Aggressive Equity funds for the review;
The important risk ratios of the above Hybrid Equity funds are as below;
The final list of best Equity Hybrid (Aggressive) as per my analysis are; HDFC Hybrid Equity Fund, ICICI Pru Equity & Debt Fund & Aditya Birla Equity Hybrid ’95 Fund.
- Portfolio Allocation & Analysis :
- ICICI Debt & Equity Fund has been performing well in the last two years. The fund invests a minimum of 65%t in equity. This allocation can go up to 80% depending on market conditions.
- Aditya Birla Fund’s under-performance within its category and peers in the last one year has seen the margin of out-performance narrow over three and five years, too. But, it is a reliable fund that has proved itself across three market cycles.
My Mutual Fund Portfolio
I have my investments in three funds – HDFC Hybrid Equity Fund, Axis LTE Fund (Tax saving) & Franklin Smaller Companies Fund. My spouse invests in Aditya Birla Tax Relief ’96 Fund for tax saving & wealth accumulation purposes.
Some Important Points to ponder about Mutual Fund Investments :
- Identify your Goals : Majority of us identify the products first and then try to shortlist best investment avenues. An investor has to first identify his/her financial goals and then try to short-list best available options. This is applicable for mutual fund investments also.
- Is it good to invest in multiple Schemes from same Fund category? – Kindly do not invest in too many funds especially within the same fund category. Over-diversification is not beneficial and may lead to high portfolio overlap.
- Consistency is the key parameter : A ‘good mutual fund scheme’ is the one that consistently manages to outperform its category returns and also it’s Benchmark’s. It is prudent to be with the consistent performers for long-term goals instead of churning your portfolio based on Star ratings or recent performances of the funds.
- I am 60 years old, can I invest in Equity Funds? – Invest in Equity funds based on your future goals & financial resources and not based on your current age. For example – If you are a retiree (say 65 years) and have regular income which is more than your monthly living expenses, you can surely invest a portion of your surplus income in hybrid or equity oriented mutual funds.
- Importance of Portfolio Performance – If one of the schemes in your MF portfolio is not performing well, do not immediately churn your portfolio. Also, do not churn your portfolio very often based on fund star ratings. The negative consequences of regularly churning the portfolio are undeniable. Do track that scheme’s performance for sometime (say 1 or 2 years) before deciding to drop it from your portfolio. Sometimes, it is prudent to analyze the overall portfolio performance than to get too worried about individual fund’s performance. Also, have realistic return expectation from your investments.
- Shall I invest in Focused/Value oriented MF Schemes? – If you have created a core portfolio with say a Large cap fund, mid-cap fund (or index based funds) & Hybrid fund, you may invest a portion of your investible surplus in focused, value oriented, Funds of funds or Theme based funds. Ex : Quantum Long Term Equity Fund, Parag Parikh Long Term Value Fund, ICICI Value Discovery, Franklin India Focused Equity Fund etc.,
- Shall I pick Index Funds? – If you are not comfortable investing in actively managed Funds, you can consider investing in Index based Funds. Ex : UTI Nifty 50 Fund (Large-cap), UTI Next Nifty 50 Index Fund (Large + Midcap) etc., It makes sense, to add one Hybrid Equity Fund to your Index based portfolio, to manage the volatility.
- Do I need to invest in Multi-cap Funds? – If you have a large-cap fund and a mid-cap oriented fund, I believe that its OK not to have a separate multi-cap fund in your portfolio. You can consider adding a Hybrid Fund to your portfolio. In case, one of your investment objectives is ‘tax-saving’ then can consider investing in an ELSS Fund (this can be treated as a multi-cap style fund).
- SIP or Lump sum? – Systematic Investment Plan (SIP) inculcates financial discipline. However, it is not a fair comparison to equate SIPs with investing in a lump sum. Both have their own pros and cons. It is better to have SIPs in place and at the same time, you can make additional investments (lump sum) when you believe that markets are down.
- Suggest you not to remain invested in equity oriented funds till the goal target year. You may consider redeeming MF units by starting SWP (Systematic Withdrawal Plan)may be 2 to 3 years before the goal year. You can re-invest this amount in safe investment avenues. You may also re-balance your portfolio based on your Asset-allocation strategy (Equity : Debt allocation).
- DIY / Advisor – If you are a DIY investor, pick Growth and Direct plans. In case, you are not comfortable investing in Mutual funds on your own or do not have the required time, do engage with a fee-only Financial planner.
I strongly believe that the first half of the calendar year 2019, can be a very volatile one for the Indian Equity markets. Keep your ‘cash’ ready to invest in Stocks / Mutual funds for long-term financial goals.
Kindly note that the above list of best & top mutual fund schemes is not an exhaustive one. Mutual funds’ returns are not guaranteed, their values/returns change frequently and past performance may not be repeated. MFs are subject to various market risks.
Continue reading :
- How to create a solid Investment Plan?
- List of best articles on Financial Planning
- When should you sell your Mutual Funds?
- What is Portfolio Tracking & Why should you do it?
- Mutual Funds Vs Unit Linked Insurance plans
- Mutual Fund Capital Gains Taxation rules FY 2018-19 AY 2019-20
(Featured Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Post first published on 26- December -2018).
(Data Source & references : Valueresearchonline, Moneycontrol, Morningstar, Freefincal & The Economictimes)