Some funds only invest in large-cap stocks, others in mid-cap or small-cap.
Ever wanted to invest in a fund that would not stick to any one preference? A fund that would invest in companies irrespective of their size or sector? That can do whatever it pleases: hunt for hidden gems, allocate money to well-known companies or buy stocks investors are bypassing? Basically, a fund that will 'go anywhere' it seeks to?
Well, there are a few wanderers of the mutual fund industry who attempt to pluck the best fruit of all seasons. And, since we all know that no one style can work forever, these funds should do well in the long-term.
We have short-listed five best 'go anywhere' options in the diversified equity funds category in alphabetical order. These funds have a long history of picking winners across market captalisation and earn consistent returns year after year. Yet, all of them have something different to offer.
This fund is projected as a tactical fund that will maximise returns by investing predominantly in certain sectors and stocks. It began that way. Today, it has a well-diversified portfolio dominated by large-caps with ample representation of mid- and small-cap stocks.
It was launched in April 2000 during the tech boom peak. With that sector collapsed that year, its Net Asset Value crashed. Yet, the fund continued to remain heavily invested in tech stocks.
This did not help and the fund continued to fare miserably. That is when the fund began to buy more stocks and invest in more sectors and stocks.
It now has a well-balanced portfolio and has displayed an ability to capitalise on good times and is one of the better funds around.
In the five-year period ended April 3, 2006, the fund's 49.63% return makes it one of the top 10 funds in the category.
The verdict: The fund has delivered, but not exactly in the way it is supposed to. Hence, investors would do well to ignore the word 'opportunities' and treat this like any other diversified equity fund.
This fund rarely delivers surprises -- on both upside as well as downside. But that is its real charm. It quietly goes on and gets the job done.
Managed by one of the finest minds in the Indian mutual fund industry, Franklin India Prima Plus offers a well diversified large-cap portfolio, low volatility and decent returns. The fund has a disciplined investing approach with a preference for stability. It has seen the boom and bust of the IPO and tech bubbles and survived as one of the best options of all times.
Even the ongoing bull run has not forced the management to take any outrageous steps to catch on with some of its hot performing peers.
The fund manager continues to pick stocks with conviction and waits for them to blossom. Stocks like Infosys, Hindalco, Grasim, Cummins, Madras Cements, Marico, NDTC and TV 18 have all done well for the fund.
Launched in September 1994, the fund's portfolio was totally out of focus by March 1996, with nearly 200 stocks in its kitty. The fund relentlessly cleaned its portfolio and now has a more focused portfolio.
The verdict: One should not expect a miracle here. This fund will work hard to generate returns and keep your money safe. If you prefer stability over flashy returns, this is the fund to have.
A number of factors have gone towards making this fund a success: ability to spot the right opportunity at the right time, swift moves to exploit the opportunity, investing with a lot of conviction, courage to take big stock and sector bets, out-of-the-box thinking and a mix of large-, mid-, and small-cap stocks have helped the fund deliver great returns year after year.
It is the only diversified equity fund that has outperformed the average return of such funds every year for the past eight years.
The fund manager's ability to think ahead of time and change the portfolio accordingly have resulted in good performances in bull and bear phases. For instance, mid- and small-cap stocks began to lose some steam in the fourth quarter of last year, while interest in large-cap stocks went up. As usual, the fund manager had already tilted his portfolio in favour of big companies. This helped the fund earn 15% in the last quarter of 2005, nearly double the returns of the average.
The fund manager invests with a lot of conviction and stays committed to them. Close to 40% of the entire portfolio is invested in the top five stocks. The rest of the investment is over 25 stocks.
The verdict: A combination of low risk and above-average return grades make this fund a compelling option in this category.
This fund concentrates primarily on India's top 200 companies by market capitalisation and hence offers a portfolio consisting of large-cap, blue chip and highly liquid stocks.
In 1999, the fund was heavily invested in FMCG and pharma and bought tech stocks rather late in the dotcom rally. In 2000, a third of all investment was in tech stocks and the fund lost tremendously when tech stocks crashed. In 2001, the situation improved because it had invested large amounts also in FMCG stocks.
Since then, the fund has always performed well
A lot of the investment is concentrated in the largest stock holding which regularly crosses 8% of the total assets. Half the investments will be in stocks from three sectors, with the technology sector being the favourite. This makes the fund volatile.
The fund manager attempts to maintain diversification by spreading the rest of the portfolio across sectors (energy, metal, pharma) and around 50 stocks.
The verdict: The fund tends to be aggressive but has delivered consistent returns.
This fund has generated outstanding returns for its investors through shuffling the portfolio among large-, mid-, and small-cap stocks.
In the five-year period ended May 5, 2006, its the second best fund with returns of over 64%, way ahead of any other fund with a similar portfolio.
The fund is not a great believer in the buy-and-hold strategy. With an investment in just around 30 stocks and a few sectors, the fund is aggressive and does not cater to the conservative investor.
The year 2002 stands out in the fund's excellent track record. It generated a massive 74.58% return as against a modest 19.43% rise of its peers. The second best that year (Reliance Growth) gave returns way behind of 55.75%.
The next year, the fund gave a return of 155% compared to the category average of 112%.
In 2004, the fund gave a return of just 19.81% when the category average was 25.92%. It was back on track in 2005 with returns of 53.47% when the average return was 46.67%.
This year, the fund seems to be doing well.
The verdict: Aggressive investors willing to wait for the long-term may find this offering to their liking.