After a lacklustre return from equity mutual funds in 2018, hybrid funds and debt funds are gaining currency in a year that faces risks of a volatile equity market with major events like general elections lined up in first of 2019.
In 2018, the return from equity mutual funds were even lower than public provident fund which has led to investors turning risk averse. However, as mutual fund investments are all about goal-based long-term investments, the pattern could vary from case to case.
Says Neil Parag Parikh, Chairman and CEO, PPFAS Mutual Fund, “If your financial goals are five-plus years ahead, then the bulk of the allocation should be made into equity and equity mutual funds, preferably through the SIP route. For any goal less than five years, bonds and debt funds should best serve you. For very short term needs, say below 18 months, liquid funds should serve the purpose.”
If you are investing for your child’s education, invest in mid-cap funds. If the investment is for retirement corpus then it should be in large-cap fund and if the investment is for short term needs then invest in debt funds like liquid funds, said a mutual fund expert. Mutual funds are right now struggling to attract fresh money. What is coming to fund houses at present is through systematic investment plans with November SIP collections at Rs 7,985 crore. Fresh money is getting allocated in schemes that carry less risk and financial planners are recommending schemes that have a good track record of performance.
Rahul Mantri, founder and partner, Midas Touch, a Pune based certified financial planner said, “My picks for 2019 on the basis of superior risk adjusted returns parameters and consistency would be ICICI Prudential Bluechip Fund, Reliance Largecap Fund and Axis Bluechip Fund in the large cap funds category. Franklin India Equity Fund, L&T Equity Fund and Aditya Birla Sun Life Equity Fund among the multicap funds. Franklin India Prima Fund, HDFC Mid-cap Opportunities Fund and Axis Mid-cap Fund among the mid-cap funds category.”
“We do not favor or suggest Small-cap funds to our clients,” Mantri said.
Amit Singh, chief executive officer, Investica, an online mutual fund investments platform by Choice Broking said,“ In order to reduce volatility, the current measures undertaken by Sebi have restricted the freedom of the fund manager by defining the type of equity exposure within the given framework. Hence `consistent’ fund performance will help get better returns over a long-term period rather than `best’ funds with volatile returns.”
“Kotak Standard Multi cap Fund, Mirae Asset India Equity Fund, UTI Equity Fund” are recommendations of Investica given their last five year return in the range of 15.21 per cent to 18.92 per cent and three year return in the range of 10.49 per cent to 13.69 per cent.
Mirae Asset Emerging Bluechip Equity, IDFC Core Equity Fund and ICICI Prudential Large & Mid Cap Fund are recommendations of Investica in the large and mid-cap fund category for their higher three year (9.72 per cent-15.80 per cent) and five year(12.96 per cent-27.07 per cent) returns.
Abhijit Bhave, CEO at Karvy Private Wealth said, “Our mutual fund scheme evaluation is a combination of quantitative and qualitative factors. On the quantitative aspects, we look at schemes which have at least a three-year track record and asset under management of more than Rs 500 crore. Risk adjusted evaluation using risk ratios that shape ratio as we believe it, is the most suitable for evaluating mutual schemes as it covers all the risks associated while evaluating the scheme.”
“On the qualitative aspects, based on a regular interaction with fund managers and their investment process and strategy, we also include select schemes in line with Karvy Private Wealth forward looking market/ sectoral outlook,” Bhave said.
Select schemes recommended by Karvy Private- Wealth include ICICI Pru Bluechip Fund, Mirae Asset India Equity Fund, UTI Equity Fund, Kotak Standard Multicap Fund, HDFC Mid-Cap Opportunities Fund, ICICI Pru Banking & Financial Services Fund.
Rajeev Srivastava, head-Retail Broking, Reliance Securities on the best mutual fund schemes to invest in 2019 says, “We suggest keeping a watch on your portfolio without doing much of switching too frequently. Investments in mutual fund schemes provide low volatility in comparison to direct equity market exposure due to fund management by experts & diversification in portfolio. Regular investment in mutual funds schemes will lead to wealth creation in long term.”
“Any smart investor can choose to protect and grow their wealth in current scenario by doing systematic investment through SIP in proven performance track record oriented mutual fund schemes from leading AMCs. Anytime is a good time to start systematic and long-term investments in mutual fund to avoid uncertainty,” Srivastava notes.
“New investments can be made in a mix of multi-cap funds, large-cap funds, hybrid funds & debt funds. Review of existing portfolio with right mix and diversification is must. Ultra short duration mutual fund can be a good choice for low & medium risk profile investors along with portfolio diversification for other risk profile customers too,” Srivastava adds.
As we enter in 2019, the Indian equity market is going to face volatility, especially in the first half of the year because of major events in the domestic as well as global markets. General elections in India, credit rating downgrades, defaults, interest rates revision, fear of recession in US and Brexit are going to be major role players in 2019. According to Srivastava, a pick in investment, capital expenditure (capex) and revival of performance of India Inc will also be keenly watched and have a huge impact for the Indian market, Srivastava said.