Fund of Fortnight

This is our mutual fund recommendation. Every fortnight , we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same.

Parag Parikh Long Term Equity Fund - Direct Plan (Growth)

Reason for recommendation

It is perhaps the first time in many decades that ‘growth’ factor has outperformed the ‘value’ factor in investing. Historically, value companies have generated returns better than growth companies. However, between 2010 and 2020, the investment return generated by growth companies has been better than the value companies. Going ahead we see value catching up with growth and likely to outperform. One such fund that is managed on the value principal is Parag Parikh Long Term Equity (PLTEF), which has already proved itself with superior returns in the last one year. For the year ending July 2020, the fund has generated return of around 17 per cent compared to meagre 0.5 per cent return generated by its category. The reason for such an outstanding performance is its portfolio.

The portfolio is not only diversified domestically but also internationally. At the end of June 2020, the fund holds almost 28 per cent of its asset in overseas securities and the fund’s largest holding is in Amazon Inc., where the fund has deployed 8.83 per cent of its net assets. It is followed by Alphabet Inc. The fund holds 65.42 per cent of its assets in domestic equity. This strategy has really helped PLTEF to clearly stand out among its category in various quantitative indicators calculated to measure its riskiness. The fund’s standard deviation is 20.07 compared to 27.7 by its category average. Even the riskadjusted return generated by the fund measured by the Sharpe ratio of 0.74 is far better than 0.02 posted by its category. Besides better return, the fund also gives good investment experience. Hence, the fund is suitable for investors who invest for the long term and are willing to take moderate risk.