Performance Matters
When the markets went into a slump last year on account of the pandemic, we used our experience of many years to cherry-pick mutual funds that investors would do well to choose for their portfolio. It’s time now to review our recommendations and see how we have fared
The market seems to be achieving a full circle over the past one year. Exactly a year ago we saw the market falling precipitously due to the lockdown imposed on account of the rising number of corona virus cases. We are in a similar situation again with the cases rising at an alarming rate and several states on the verge of imposing strict lockdowns. Maharashtra has already done so. The equity market, however, is not falling like a pack of cards but has turned volatile now. Nonetheless, we do not see the situation worsening much from here both on the health and market front. In March 2020 we were not prepared at all for what lay ahead but the country is now much better prepared to deal with the crisis.
Most of the companies have seen stabilisation in their operation and work from home is now the new norm. Besides, we now have many vaccines that will help us to mitigate much of the health risk. These events create a good opportunity to invest for a longer duration. We saw how last year rewarded investors who had the courage to see beyond the short term. In fact, the last financial year turned out to be one of the best years in terms of returns from equity investment. Nevertheless, in the month of April 2020 nobody would have predicted this. We, however, with our experience and expertise had the conviction it was a passing phase and hence we continuously helped our readers with best of mutual fund recommendations. We will now review the recommendations of the last one year.
Model Fund Portfolio UnveiledCover Story
(Vol. 35 Issue No. 10)
In the month of April 2020 when there was no clarity on where the market was moving and how long the lockdown would last, based on our experience of market reading we felt it was the right time to invest in equities. Hence, in our issue dated April 9, 2020 we clearly said ‘that such crashes offer a great investment opportunity’ for investment. Hence, we gave three model portfolios. There was not much difference in the recommendations; however, the weight of individual recommendation was different for different portfolios
depending upon the risk profile of an investor. This portfolio was purely for wealth creation and was not to be allocated to any of your financial goals. A couple of funds have doubled from our recommended NAV.
After one year we can very humbly say that the portfolio has achieved the goal for which it was recommended. All three portfolios have generated returns in excess of 60 per cent and clearly outperformed the Sensex. The graph below shows the performance of our three recommended portfolios against the Sensex and BSE 500.
Not only returns but the risks associated with such portfolios were lower than the benchmarks. For example, the volatility of the portfolio was around 17 per cent whereas for Sensex and BSE 500 it was more than 19 per cent and 21 per cent, respectively. Even if we consider maximum drawdown as a measure of risk, we see that our recommended portfolio fell less from its peak compared to the benchmark indices. The following table shows the risk and return statistics of our portfolios, which are definitely superior to that of benchmarks.
Earn Double Digit Returns from Your Funds
Cover Story (Vol. 35 Issue No. 19)
The next set of recommendation we gave in our cover story was in the month of August 2020 when the frontline indices were up by almost 45 per cent from their recent lows and the economy was yet to show significant sign of recovery. Yet we put our neck out and claimed that our recommendation was going to generate returns in double digits. All have generated double-digit return in less than nine months and are yet looking strong.
The average return generated by these funds is 41.42 per cent. The only fund from our recommendation that underperformed its benchmark in the same period is Invesco India Mid-Cap Fund. The rest of the funds could comfortably beat their benchmarks. The best outperformance came from ICICI Prudential Technology Fund that outperformed its benchmark by 13 per cent. MF SelectIn addition to these cover stories we also give regular recommendations in our magazine under ‘MF Select’. Funds in this column are recommended looking at the current theme that is going to sustain for a while. Hence, they are recommended MF schemes with different themes. Some of our recommendations have generated returns in excess of 50 per cent. The following table shows the performance of our recommendation.
The above table does not tell much about the performance of funds and its needs proper comparison. Hence, we have compared it with Nifty 500 TRI as it consists of large-cap, mid-cap and small-cap stocks. What we see is that our recommendations have performed far better than the Nifty 500 TRI.
The graph alongside shows the performance of ‘MF Select’ against Nifty 500 TRI. Our recommendations outperformed the benchmark by 2.6 per cent. Performance Perspective“In god we trust, all others must bring data,” said W Edwards Deming. Deming, a champion of using data and measurement, suggested that problems should be solved through robust data analysis. We tried to analyse our performance in the most objective way and found that we have done reasonably well.