Mutual Funds are of various types depending on the risk involved. The composition of the mutual funds vary depending on the proportion of equity, debt and cash.
Returns on an SIP depends on the risk that an investor is willing to take. More the risk, more is the return. In this case, since the risk involved is moderate, the return is also moderate. A risk of 9 to 12 % can be expected for a low moderate risk and a return of 11 to 18 percent can be expected for a high moderate risk. Investments in following types of funds can be made:
- Large cap Funds- Moderately High Risk
- Multi cap Funds- Moderately High Risk
- Equity Oriented Balanced Fund- Moderately High Risk
- Monthly Income Plan- Moderately Low Risk
- Income Funds- Moderately Low Risk
- Debt Oriented Balanced Fund- Moderately Low Risk
Investing in these funds can be done via lumpsum as well as via Systematic Investment Plan (SIP).
An investor having INR 100 for 10 years will stay invested for the entire period of 10 years. But in case of SIP if INR 10 is invested every year for 10 years, then first installment of INR 10 will be invested for 10 years, next installment for 9 years and so on. So here the growth is less.
Small Cap Funds:
Small cap stocks basically have the maximum growth potential, since the underlying companies are new, and seek to expand competitively. They are more unsafe to a business or economic downturn, making them more volatile than large and mid cap funds. Investors who are looking to invest in the small cap sector and may not have the time to research about the company but have the high risk taking appetite can look to invest in small cap mutual funds.
Small and mid cap funds typically perform better than large cap funds during a bull market, but fall more when the sentiment in the market is bearish. The selection of a right fund should be in line with the risk taking capacity, return anticipation and investment duration of the investor.
An investor looking to invest in a small cap fund should preferably invest for a longer duration of time since high risk is involved. A tenure of 5 years is considered to be appropriate for investing in small cap funds.
If an experienced investor having a good knowledge of investment in mutual funds should be suggested to go ahead for small cap funds, keeping both advantages and disadvantages in mind. But investors should think of investing for longer tenure in small cap scrips as it has been seen that these companies take 3 to 4 years to establish themselves and give healthy returns. Best part of small caps funds is that they are not heavily followed in share market and are generally untapped by institutional investors, giving a big opportunity to smart investors to grow their investment quickly.
A beginner should avoid investing in small cap mutual funds. To make sure that the fund is in right hands, select a fund house having fund manager with good amount of experience managing small cap funds.
As the name suggests, Reliance Small Cap Fund is a small cap fund where majority of the investment is made in small cap.
This fund is very aggressive and is suitable for investors looking to take risk. Investment in this fund should be made for a long duration i.e investment should be made for more than 3 years.
More than 90% investment is made in equity and a minor part is kept as cash for liquidity purpose. Approx 50% invested in small cap stocks, followed by 40% in mid cap and remaining in large cap stocks. It has diversified its investment in various sectors with majority in consumer goods, Industrial Manufacturing and Financial Services. 3 year and 5 year returns are higher than the benchmark, which shows that its good for long term investment. 1 year return is lower than benchmark, which shows that investors should not invest in this fund for a shorter duration. Risk is higher compared to the benchmark. Expense ratio is 2.01v%. Exit Load of 1 % is applicable, if redeemed within 1 year.
Few of the top holdings of this fund are:
- RBL Bank Ltd
- Navin Fluorine International Ltd
- VIP Industries Ltd
- United Breweries Ltd
Past performance shows that the fund has been performing really well. Also the fund manager is making right choices of stocks to invest in. This fund is recommended for investment with a long term horizon provided the investor is ready to take risk.
|Expense Ratio||1.99 %|
|Fund size||6371 Cr|
|1 year Return||41.82 %|
|3 year Return||23.03 %|
|5 year Return||36.71 %|
The fund looks to invest majorly in the small and mid cap stocks and thus has approx 2/3rd of its allocation of mid cap category followed by approx 30% in small cap category and the remaining in the large cap.
The portfolio has 63 scrips with top 5 accounting for less than 25 % thus showing a fair degree of diversification and reducing the risk of concentration in few funds.
While the fund manager does not follow any value or growth style of investing for the fund, they look to make sure that the fund is invested completely at all times and show the highest performing stocks in the mid and small cap category.
The fund managers primarily look for strong management, robust fundamentals, sustainability and demand of business before including any stock in the portfolio.
The fund has performed better than its benchmark even in bad times in the market without having much backup from large cap stocks.
|Expense Ratio||2.38 %|
|Fund size||2152 Cr|
|1 year Return||44.19 %|
|3 year Return||21.21 %|
|5 year Return||–|
Franklin India Smaller Companies Fund is managed by Mr. R Janakiraman, Srikesh Nair, Hari Shyamsunder. The fund focuses to give long term capital appreciation by investing in mid and small cap companies. Generally, it would invest atleast 75 % of its funds in smaller companies. The fund’s performance has been similar in comparison to other funds in this category.
Franklin India Smaller Companies Fund is an equity oriented mid cap scheme which means majority of investor’s money will be invested in scrips of mid and small cap companies. Large cap companies try to be stable compared to mid cap and small cap companies while mid cap companies try to give higher returns. Now the fund has just 8 % exposure to large sized companies, 72.9 % exposure to mid sized companies and 19 % exposure to small sized companies.
|Expense Ratio||2.43 %|
|Fund size||7497 Cr|
|1 year Return||24.89 %|
|3 year Return||16.61 %|
|5 year Return||30.41 %|
Mid Cap Funds
Mid Cap Fund lie between large caps and small caps in terms of company size, i.e these are the companies that mainly have a market capitalisation within the range of ₹500 crore to ₹10,000 crore. Fund managers mainly try to select this option to give better returns to their investors as these are shares of companies who are actively looking for investment opportunities for expanding their business, through right scrip selection, diversification across sectors, and market timing.
There will be many funds offered by a mutual fund company and most of these funds will be investing based on the pre defined goals. In a Mid Cap equity fund, fund manager is anticipated to invest upto the extent of 60 to 80 % of their assets in the same category and remaining percentage has to be in Debt and Cash form to provide consistent returns. The most famously used benchmarks for these Mid cap funds are the Nifty Mid Cap 100 Index and the BSE Mid Cap Index.
HDFC Mid Cap Opportunities Fund is a mid cap fund that has consistently given stable returns to its investors.
This fund is 10 years old and performed better than its benchmark NIFTY Free Float Midcap 100. In the past 1 year, this fund has performed exceptionally well and has given a return of 32%, which is double of what its benchmark index has given.
Few key points for this fund are:
- Age is more than 10 years
- Risk is lower than the benchmark
- Returns are higher than the benchmark
- Asset Under Management (AUM) is more than 5000 crore, which is not a good thing since returns tend to decrease when AUM crosses a certain limit.
- Approx 96% of the AUM has been invested in equity and the balance has been kept as cash for liquidity purpose.
- Majority of the investments are in mid cap category, followed by large cap and a minor portion has been invested in small cap.
- Investments have been made in various sectors, with maximum investment in Financial Services.
This fund has invested in very reliable companies which have performed very well in the past years and are also expected to perform great in the upcoming years. An investor willing to take moderate risk can definitely invest in this fund. A modest return of 16-20% can be expected for investments made in this fund.
|Expense Ratio||2.26 %|
|Fund size||20959 Cr|
|1 year Return||20.68 %|
|3 year Return||15.54 %|
|5 year Return||26.89 %|
Mirae Asset Emerging Bluechip Fund is a midcap fund. Investors with a high risk appetite should invest in this fund. An aggressive investor looking to invest for 5 years or more should invest in this fund. First time investors should prefer to invest in a large cap fund.
The returns of this fund has surpassed the NIFTY Free Float Midcap 100.
The risk involved in this fund is comparatively lower than the benchmark. Its 1 year, 3 year and 5 year return is higher than the benchmark. This fund started 10 years back and has been constantly performing well. Thus fund has an AUM (Asset Under Management) of more than 4000 crores.
More than 98 percent of investments have been made in Equities. Remaining is kept as cash for the liquidity purpose. There is no investment made in Debt or government bonds. 60 percent investment is made in Mid Cap Funds followed by 35 percent in Large Cap. This fund has diversified its investments in all the segments with highest allocation given to Financial Services.
Few top holdings of the fund are:
- Kotak Mahindra Bank Ltd
- Tata Steel Ltd
- Ceat Ltd
- Raymond Ltd
- Voltas Ltd
- Tata Global Beverages Ltd
Expense ratio of this fund is more than 2 percent, which is comparatively high. If the investor wants to invest in Mid Cap Equity category then the other options available are:
- Aditya Birla Sun Life Small and Midcap Fund
- L&T Midcap Fund
- DSP Blackrock Small and Micap Fund
In case the investor is not willing to take much risk, then he can go for a balanced fund with investments in large cap. After reading the above information, an investor can himself smartly decide which fund to invest in.
|Expense Ratio||2.46 %|
|Fund size||5364 Cr|
|1 year Return||22.83 %|
|3 year Return||19.41 %|
|5 year Return||31.15 %|
The asset size of the scheme that amounts to Rs. 1323 crore. The total assets have been divided into equities and cash as 86.60 % and 13.40 % respectively. Being a growth plan, this fund gives a very good opportunity for improving the capital worth by diversifying the money into different sectors.
The sectoral graph shows that majority of the funds have been invested in the financial, construction, chemicals, FMCG, engineering and metal industries. The top holdings include some very good companies involving Shree Cement, Aarti Industries, Ratnamani Metals and Tubes, Triveni Engineering, Federal Bank, and Mphasis Ltd.
This mid cap fund takes a good exposure to small caps. Although not among the high alpha generators, margin of return relative to the benchmark index, the fund enjoys a healthy track record of steady performance. The fund’s portfolio is highly diversified and its risk conscious approach is seen in the limited exposure taken to individual stocks which is not exceeding 3% of the capital. The fund manager uses a free wheeling approach for stock picking, with 75% of the portfolio weight consisting of shares not part of the benchmark index. He looks for opportunities coming out of the market shift towards organised sector and high growth of smaller sectors. While other mid-cap funds offer a better return profile, this fund can be a good selection for more conservative investors.
|Expense Ratio||2.17 %|
|Fund size||1323 Cr|
|1 year Return||29.33 %|
|3 year Return||18.64 %|
|5 year Return||30.05 %|
Aditya Birla Sun Life Pure Value fund started in 2008 as a closed ended fund for 3 years and after that was converted into an open ended fund. It means that starting 2011 an investor could invest in or sell out from this scheme anytime.
The CIO of Birla Sunlife mutual fund, Mahesh Patil was made the fund manager of this scheme and it started to give decent returns.
The growth was not difficult to come. From just about Rs. 400 crores size in March 2016, it increased to Rs. 1,000 crores in March 2017. Now the fund size is Rs 1456 cr. On the expense side, the scheme has kept on reducing it with time. This is a positive sign for investors. The current expense ratio is 2.35 %.
It has been steadily running a turnover ratio of over 200%. The last reported turnover ratio of the fund is a as high as 272%. As a novice, what this means to an investor is that on an average a stock remains in its portfolio for less than 4 months.
This fund has invested 95.3 % in equity and rest is kept as cash. Investments have been made in sectors like Energy, Chemicals, consumer goods. 60.7 % of the portfolio has been invested in mid cap, followed by 27.1 % in large cap and the remaining in small cap.
The fund has invested in scrips like Hindustan Petroleum Corporation Ltd, Gujarat Alkalies & Chemicals Ltd, Tata Global Beverages Ltd and Tata Chemicals Ltd.
|Expense Ratio||2.35 %|
|Fund size||1456 Cr|
|1 year Return||29.21 %|
|3 year Return||18.58 %|
|5 year Return||30.10 %|
Aditya Birla Sunlife Small and Midcap Fund is managed by Mr Jayesh Gandhi. This fund focuses to generate growth and capital appreciation by investing mainly in equity and equity related instruments of companies to be small and mid cap. New investors would be suggested to skip this fund.
Aditya Birla Sunlife Small and Midcap Fund is a mid cap fund which means it would invest investor’s money in scrips of medium and small cap companies. Mid cap and small cap companies try to give higher returns while large cap companies generally are stable. It has 70.80 % allocation to midcap companies and approx 29.20 % is contributed by small cap companies.
The fund has been giving around 28.30% returns for investors who have stayed invested for 5 years. An exit load of 1% is charged for units sold within a year from the date of allotment. No exit load applies for units withdrawn post one year. Expense ratio of Birla Sunlife Small and Midcap Fund is 2.40 %.
|Expense Ratio||2.4 %|
|Fund size||1866 Cr|
|1 year Return||28.93 %|
|3 year Return||19.77 %|
|5 year Return||28.30 %|
This mid cap fund has performed better than its benchmark and category average for many years. While it invests mainly in mid caps, its exposure to large caps is presently much higher than many of its category funds. The portfolio is highly diversified with a moderate exposure to its best picks.
The fund manager takes a pure bottom up stock selection approach and is not restricted by the benchmark. The concentration is on businesses with quality management, which can increase up the business and keep on healthy cash flows.
With a high risk reward profile relative to most of its peers, and a steady performance over the past few years, the fund is a good pick in its category.
|Expense Ratio||2.37 %|
|Fund size||1625 Cr|
|1 year Return||26.75 %|
|3 year Return||16.51 %|
|5 year Return||27.97 %|
Above mentioned are the funds from both mid cap and small cap category. An investor can investor in either of the funds depending on the risk appetite of the investor. SIP can be done in either of these funds. New investor should avoid investing in these funds are these involve high risk. Minimum duration for investing in small and mid-cap category funds is 5 years.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.
Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.