Synopsis
According to Sebi norms, focused equity mutual fund schemes must invest in a portfolio of maximum 30 stocks. These schemes have no other restrictions when it comes to investing- like flexi cap schemes they can invest in any market capitalisations and sectors. If that investment strategy appeals to you, you can get to know more about focused equity schemes.
Many mutual fund investors believe that a concentrated portfolio would help them to earn better returns. They believe many mutual fund schemes offer average returns because they have an extremely large diversified portfolio. Such investors may consider investing in focused mutual fund schemes.
According to Sebi norms, focused equity mutual fund schemes must invest in a portfolio of maximum 30 stocks. These schemes have no other restrictions when it comes to investing- like flexi cap schemes they can invest in any market capitalisations and sectors. If that investment strategy appeals to you, you can get to know more about focused equity schemes.
Also Read |SBI hikes FD interest rates. What should debt mutual fund investors do?
As you can see, these schemes have a concentrated portfolio. That means that the fund manager will choose stocks based on his or her conviction and take a meaningful exposure in the stock. Such investments can pay off handsomely if the call goes right. However, if a few calls go wrong, the scheme will suffer a lot. This is the trouble with concentrated bets.
Similarly if the manager succeeds in identifying the sectors and market capitalisations ahead of the market, it will benefit the scheme a lot. If the call goes wrong, the scheme will suffer a lot. Once again this is the peril of having a concentrated portfolio. You will gain a lot or lose a lot - depending on your stock-picking skills.
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If you are ready to take more risk and have an investment horizon of around seven years, you may invest in these schemes. Here are our recommended focused equity mutual fund schemes. Follow our monthly updates to keep track of your investments. SBI Focused Equity Fund was in the third quartile for four months. Sundaram Focused Fund has been in the third quartile for four months. The scheme had been in the second quartile for four months before.
Also Read |Large, mid and smallcap stocks that mutual funds bought and sold in May
Best focused equity mutual funds to invest in June 2024
- 360 ONE Focused Equity Fund
- SBI Focused Equity Fund
- Sundaram Focused Fund
- Quant Focused Fund
Methodology:
ETMutualFunds.com 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. 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 returns is said to be a geometric Brownian time series. This 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
(Disclaimer: past performance is no guarantee for future performance.)
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Read More News on
sbimutual fundsmutual fund newsBest focused funds to investBest focused fundsSebiSBI Focused Equity FundSundaram Focused FundQuant Focused Fund
(Catch all the Mutual Fund News, Breaking News, Budget 2024 Events and Latest News Updates on The Economic Times.)
Subscribe to The Economic Times Prime and read the ET ePaper online.
...moreless