Article

5 Mutual funds to buy in 2018

03 Apr 2018 Jitender Singh

Investors witnessed spectacular returns in 2017. In 2017, BSE Sensex has given ~27% return YTD, whereas BSE Mid-cap has given ~46% return in 2017. Small-cap stocks outperformed the Blue chip and Mid-cap stocks, BSE Small-cap has given fabulous ~57% return in 2017.

As the nightmares of GST and demonetization have passed, we are expecting the market to be on the upward trajectory in 2018. Investors can make significant returns in 2018. Investors who do not have expertise and time to track the market can invest in equity market via mutual funds.

Returns as on December 21, 2017

One of the best ways to create wealth in the long term in the equity market is through equity mutual funds. Historically, it has been observed that equity mutual funds have outperformed inflation in long term despite short term volatilities. Moreover, Indian mutual fund industry is mature and well regulated.

Investors can invest in lump sum and/or via SIPs in mutual funds. SIP is a method in which a particular amount is invested in mutual funds regularly for a pre defined period. SIPs allow investors to reap the benefit of ‘Rupee Cost Averaging’.

We have selected the five best mutual funds to invest in 2018.

scheme AUM (Cr.) 1 Y (%) 3 Y (%) 5 Y (%)
Aditya Birla SL Top 100 Fund(G) Rs.3,703 31.9 12.1 18.0
Tata Equity P/E Fund(G) Rs.2,235 39.6 18.0 23.0
Franklin India Prima Fund(G) Rs.6,515 38.8 17.9 25.5
HDFC Mid-Cap Opportunities Fund(G) Rs.19,740 40.7 19.3 26.5
DSPBR Small & Mid Cap Fund-Reg(G) Rs.5,112 39.9 19.4 24.0

1 year returns are absolute; Returns greater than 1 year are CAGR
AUM as of November 2017; Returns as on December 21, 2017; Source: ACE MF

Aditya Birla SL Top 100 Fund

  • It is a large-cap equity fund, which primarily invests in top 100 stocks by market capitalization.
  • The fund follows growth cum value investment style to create wealth in long term. 
  • As of November 2017, the fund had invested ~82% of its AUM in large-cap stocks and ~11% in mid-cap stocks.
  • Investors who want to primarily invest in large-cap stocks can invest in the fund to create wealth in the long term.

Tata Equity P/E Fund

  • It is a value conscious equity fund, which aims to invest 70-100% of its AUM in stocks whose 12 months rolling PE ratio is lower than 12 month rolling PE ratio of BSE Sensex.
  • The remaining AUM is allocated in other equity and debt instruments.
  • As of November 2017, the fund had invested ~61% of its AUM in large-cap stocks and ~31% in mid-cap stocks to generate higher returns.
  • Investors who are value conscious and want to invest in large-cap and mid-cap stocks can invest in the fund.

Franklin India Prima Fund

  • It predominantly invests in small-cap and mid-cap stocks which tend to exhibit higher growth than large-cap stocks.
  • It aims to identify and invest in companies which are at an early stage of the business life cycle as they have an enormous potential to grow.
  • As of November 2017, ~66% of AUM was invested in mid-cap stocks, and ~23% in large-cap stocks to generate high returns for investors.
  • Investors who want to primarily invest in mid-cap stocks can invest in this fund to create wealth in long term.

HDFC Mid-Cap Opportunities Fund

  • It is a mid-cap equity fund which has allocated, as of November 2017, ~61% of its AUM to mid-cap stocks, ~25% to large-cap stocks, and ~11% in small-cap stocks to generate high returns for investors.
  • It has well diversified portfolio with no more than ~10% exposure to any particular sector.
  • It has also managed its concentration risk, top 10 stocks account for only ~25% of the AUM.
  • Investors who want to primarily invest in mid-cap stocks with some exposure to small-cap stocks can invest in this fund to create wealth in long term.

DSP BlackRock Small and Mid Cap Fund

  • It invests in stocks beyond top 100 companies, based on market capitalization.
  • The fund manager invests in small-cap and mid-cap stocks with consistent earnings and significant growth potential.
  • It follows bottom-up approach to select the stocks. 
  • As of November 2017, ~54% of its AUM was invested mid-cap stocks, ~24% was invested in large-cap stocks, and ~17% in small-cap stock to generate high returns for investors.
  • Investors who want to primarily invest in mid-cap and small-cap stocks can invest in this fund to create wealth in long term. 

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5 Mutual funds to buy in 2018

03 Apr 2018 Jitender Singh

Investors witnessed spectacular returns in 2017. In 2017, BSE Sensex has given ~27% return YTD, whereas BSE Mid-cap has given ~46% return in 2017. Small-cap stocks outperformed the Blue chip and Mid-cap stocks, BSE Small-cap has given fabulous ~57% return in 2017.

As the nightmares of GST and demonetization have passed, we are expecting the market to be on the upward trajectory in 2018. Investors can make significant returns in 2018. Investors who do not have expertise and time to track the market can invest in equity market via mutual funds.

Returns as on December 21, 2017

One of the best ways to create wealth in the long term in the equity market is through equity mutual funds. Historically, it has been observed that equity mutual funds have outperformed inflation in long term despite short term volatilities. Moreover, Indian mutual fund industry is mature and well regulated.

Investors can invest in lump sum and/or via SIPs in mutual funds. SIP is a method in which a particular amount is invested in mutual funds regularly for a pre defined period. SIPs allow investors to reap the benefit of ‘Rupee Cost Averaging’.

We have selected the five best mutual funds to invest in 2018.

scheme AUM (Cr.) 1 Y (%) 3 Y (%) 5 Y (%)
Aditya Birla SL Top 100 Fund(G) Rs.3,703 31.9 12.1 18.0
Tata Equity P/E Fund(G) Rs.2,235 39.6 18.0 23.0
Franklin India Prima Fund(G) Rs.6,515 38.8 17.9 25.5
HDFC Mid-Cap Opportunities Fund(G) Rs.19,740 40.7 19.3 26.5
DSPBR Small & Mid Cap Fund-Reg(G) Rs.5,112 39.9 19.4 24.0

1 year returns are absolute; Returns greater than 1 year are CAGR
AUM as of November 2017; Returns as on December 21, 2017; Source: ACE MF

Aditya Birla SL Top 100 Fund

  • It is a large-cap equity fund, which primarily invests in top 100 stocks by market capitalization.
  • The fund follows growth cum value investment style to create wealth in long term. 
  • As of November 2017, the fund had invested ~82% of its AUM in large-cap stocks and ~11% in mid-cap stocks.
  • Investors who want to primarily invest in large-cap stocks can invest in the fund to create wealth in the long term.

Tata Equity P/E Fund

  • It is a value conscious equity fund, which aims to invest 70-100% of its AUM in stocks whose 12 months rolling PE ratio is lower than 12 month rolling PE ratio of BSE Sensex.
  • The remaining AUM is allocated in other equity and debt instruments.
  • As of November 2017, the fund had invested ~61% of its AUM in large-cap stocks and ~31% in mid-cap stocks to generate higher returns.
  • Investors who are value conscious and want to invest in large-cap and mid-cap stocks can invest in the fund.

Franklin India Prima Fund

  • It predominantly invests in small-cap and mid-cap stocks which tend to exhibit higher growth than large-cap stocks.
  • It aims to identify and invest in companies which are at an early stage of the business life cycle as they have an enormous potential to grow.
  • As of November 2017, ~66% of AUM was invested in mid-cap stocks, and ~23% in large-cap stocks to generate high returns for investors.
  • Investors who want to primarily invest in mid-cap stocks can invest in this fund to create wealth in long term.

HDFC Mid-Cap Opportunities Fund

  • It is a mid-cap equity fund which has allocated, as of November 2017, ~61% of its AUM to mid-cap stocks, ~25% to large-cap stocks, and ~11% in small-cap stocks to generate high returns for investors.
  • It has well diversified portfolio with no more than ~10% exposure to any particular sector.
  • It has also managed its concentration risk, top 10 stocks account for only ~25% of the AUM.
  • Investors who want to primarily invest in mid-cap stocks with some exposure to small-cap stocks can invest in this fund to create wealth in long term.

DSP BlackRock Small and Mid Cap Fund

  • It invests in stocks beyond top 100 companies, based on market capitalization.
  • The fund manager invests in small-cap and mid-cap stocks with consistent earnings and significant growth potential.
  • It follows bottom-up approach to select the stocks. 
  • As of November 2017, ~54% of its AUM was invested mid-cap stocks, ~24% was invested in large-cap stocks, and ~17% in small-cap stock to generate high returns for investors.
  • Investors who want to primarily invest in mid-cap and small-cap stocks can invest in this fund to create wealth in long term. 

Research Disclaimer