What are the key things that one should watch out for while investing in MFs?
The key things an investor needs to watch out while investing is to maintain a well-diversified portfolio and sticking to the asset allocation plan. With equity markets surging in 2009, portfolios of many investors in mutual funds could have got skewed.
Investors need to choose schemes based on the track record vis-à-vis the peer group and the benchmark index. Historical analysis shows that funds that top the charts in one year may underperform the following year. Look for schemes that provide superior risk-adjusted returns.
What is your investment strategy right now?
Even with the surge in equity bourses in 2009, we are overweight in equities versus debt in 2010. Capital goods and infrastructure are our favourite themes given the increased government push towards infrastructure and the capex cycle again starting in 2010.
With spiraling inflation and economic revival, RBI may opt for further monetary tightening. Investors in debt-oriented schemes should increase allocation to floating rate funds, short-term funds and fixed maturity plans (FMPs).
Which funds do you recommend among the equity diversified category?
HDFC Top 200 Fund is a good bet as it has a proven track record. It is among the top four performers over various periods. Moreover, it is less volatile within its peer group, thus providing superior risk-adjusted returns.
Another good option is DSP Black Rock Top 100 Equity Fund, at the fourth place among its peer group of diversified equity funds over a five-year period (as in December 2009). It maintains majority of its holdings in blue-chip companies and large-cap stocks with marginal allocation to mid-cap stocks.
