As a fund analyst, it is my job to analyze the various schemes available.
Here I share my views briefly on how I have put my expertise to use in my personal portfolio decisions.
This information is for educational purposes only and should not be taken as Morningstar’s research team or its analysts providing you with personalized investment advice. None of the funds mentioned are recommendations.
My core holdings.
Why?
These funds qualify on various counts.
HDFC Top 100 and DSP Mid Cap are managed by seasoned managers. The strategy is robust and has withstood across various market cycles. Also, both these funds offer a relatively differentiated investment proposition within their respective peer groups, which adds significant value in my portfolio. The equity investment team at Franklin Templeton follows a team-based investment approach.
The investment approach followed by all these schemes gels well with my long-term investment approach. All three funds have a unique investment proposition, they match my requirement and are an apt fit in my portfolio.
I also have a small-cap fund. When it comes to size, the assets under management matter in this case. Many fund houses have displayed a willingness to restrict flows into their small-cap fund, if its size breaches a certain threshold. I prefer those fund houses when it comes to investing in small-cap strategies.
Performance, or the lack of it.
When I invest in a fund, I look at the fund’s investment strategy and manager’s skill sets. I don’t chase outsized performance and move from one fund to another for instant gratification. That approach is counterproductive. It also keeps me grounded during phases of underperformance.
Every manager or strategy goes through a downturn. The manager should be able to make a comeback. The strategy should be robust enough to deliver when it is back in favour. Short-term underperformance doesn’t deter my conviction as long as my thesis on investing in a fund remains intact and it continues to fit into my investment criteria.
Its performance has been noteworthy since the time I have invested in this fund. Even if the fund’s performance slips, with everything remaining intact, I won’t worry too much as my investment horizon is 8-10 years.
The fund has underperformed over the last few years, but that is not unexpected. This fund is run with extensive focus on valuation and, value as a style, hasn’t performed well over the last three years. Plus, the fund has significant exposure to PSUs and that segment has lagged too. Despite that, I continue to have my conviction in the fund given the portfolio is strong and well positioned to benefit from the turnaround in the market. In fact, with the recent broad-based rally in the market, the fund has made a good comeback over the last few months, which shows that when the strategy is in favour, the performance of this fund will be back on track. Though this time the underperformance has been more prolonged, I am not worried. In fact, I continue to build my portfolio in this fund.
My investment here spans almost a decade. The fund hasn’t performed that well due to the strategy being out of favour. But since I have been invested in it for a really long time, the impact of its recent underperformance hasn’t had any meaningful impact on my investments. I continue to have faith in this fund and its prospects as the portfolio is strong.
A word of caution.
Investors must exercise their own independent judgement when reviewing investment products and strategies in light of their own objectives, experience, and financial position. Please consult with your own financial professional before making investment decisions.
Disclaimer:
© 2020 Morningstar. All rights reserved. The Morningstar name is a registered trademark of Morningstar, Inc. in India and other jurisdictions. Research on securities, referred to for the purpose of this document as “Investment Research”, is issued by Morningstar Investment Adviser India Private Limited, which is registered with SEBI as an Investment Adviser (Registration number INA000001357), providing investment advice and research, and as a Portfolio Manager (Registration number INP000006156). Complete disclaimers here.
