Last Updated on May 9, 2020 at 2:41 pm
Tata Focused Equity Fund is the new “focused fund” from Tata AMC. Its NFO period closes 29th Nov 2019 and the fund will be available for purchase again from (or before) Dec 11th 2019. Let us take a look at the features of this fund to find out if this is any different or worth keeping an eye on.
Tata Focused Equity Fund will be managed by Rupesh Patel who also manages Tata Midcap Growth Fund, Tata Large Cap Fund, Tata India Tax Savings Fund, Tata Infrastructure Fund and Tata Ethical Fund & Tata Offshore India Sharia Scheme. Let us begin with a faq on focused funds.
FAQ on Focused Mutual Funds
Why do AMCs keep launching NFOs? Short answer: for profit. NFOs can generate a quick 1000 Crores (for big, established AMCs) in about a month. Are there any rules that govern the type of NFOs? Yes. The SEBI fund categorization rules.
These rules state only one scheme per category would be permitted, except:
🔥Secure your future with our Robo-advisory tool trusted by over 3,500 investors and advisors. From effortless retirement planning to funding your children’s biggest dreams, turn your financial goals into reality. 🔥
Subscribe for money management solutions via email! (Link takes you to our email sign-up form) Join 32,000+ readers in our community.
👉 New Tool Alert! NaviPlan: A Privacy-Focused Multi-asset Tracker and Goal Planner 👈
- Index Funds/ ETFs replicating/ tracking different indices
- Fund of Funds having different underlying schemes
- Sectoral/thematic funds investing in different sectors/themes
This is the reason why we notice the big AMCs push sectoral or thematic funds these days. There is no limit on the number of such funds each AMC can promote. In the present, there can only be on focused fund per AMC.
What is a focused fund? A focused fund is one that can only invest in 30 stocks. They much maintain 65% equity exposure to maintain tax status as an equity fund. There are no restrictions on where they can invest in terms of market cap and sectors.
Why 30 stocks? The origins of this could be from a paper by Lawrence Fisher and James H. Lorie where they point out a 30-odd stock portfolio could result in an optimal mix of risk and reward. This is quite debatable as discussed in this Investopedia article.
Will having only 30 stocks in the portfolio make it more risky or rewarding? It depends. If one picks the top 30 stocks from the Nifty 50, the risk and reward will be barely different (see the picture in the above link). If the fund picks say an equal amount of large, mid and small cap stocks then it will be more volatile than say the Nifty 500. Rewarding may or may not be!
What are the pros and cons of a focused fund? There are two aspects to this. In general, a focused fund can be more fund manager dependent than a diversified mutual fund. However, a 100% equity portfolio with 30 stocks will have 3.3% individual exposure only about 1% more than for 50 stock portfolio which is typical for diversified equity funds.
The second aspect concerns investors. For a focused to work in an investors portfolio, it should have a big enough presence. That it is should be the core holding. Add a large cap or another multicap to it, then the benefits will get diluted.
Tata Focused Equity Fund: Basic Features
Asset Allocation: Tata Focused Equity Fund can allocate its assets in the following way: Equity and equity related instruments: 65% to 100% (30 stocks maximum with no foreign securities); Bonds: 0% to 35%; REITs & InvITs: 0% to 10%. There will be no cash calls based on market conditions. Buying and holding with the main approach.
Investment Strategy: According to the scheme presentation (again a case of the scheme document having no useful information and the presentation having plenty but none of it legally binding), the fund will combine value and growth investing.
The AMC defines “growth” as 15%+ CAGR over 3 years plus businesses that have a long runway. The fund hopes to remain in such companies as they scale up. They will use a bottom-up approach to pick stocks without reference to the benchmark (BSE 200)! In short, there is nothing different or unique about the fund’s proposed investment strategy.
Unfortunately, the scheme presentation places too much emphasis on “picking the right stock” with some cherry-picked illustrations to back this up. The whole point of investing in a mutual fund (with 30 stocks or 60) is to reduce selection risk!
Tata Focused Equity Fund: Should You Invest
If your portfolio (not you) actually needs a focused multicap fund, then you certainly can take a chance with this fund. It would be the same amount of chance with any other focused fund such as the ones we have reviewed before: SBI Focused Equity Fund, Axis Focused 25 Fund, Franklin India Focused Equity Fund, Mirae Asset Focused Fund. The reason being, the focused category is only about a year old (May 2018).
Staying away from such focused fund and sticking to aggressive hybrid or balanced advantage or multi-asset funds is a better choice in the author’s opinion. See for example 11 aggressive hybrid (balanced) mutual funds that have beat Nifty 100!!
We are on Google News
Use this button to add freefincal.com as a preferred personal finance source on Google News.
Explore 1,400+ videos on YouTube!
Subscribe to get posts via email!
Join 32,000+ readers and get free money management solutions delivered to your inbox! (Link takes you to our email sign-up form)Join our WhatsApp Channel
Explore our products
🔥Join our community of 9000+ users! 🔥- Use our Robo-advisory Tool to create a complete financial plan! More than 3,500 investors and advisors use this! Use the discount code robo25 for 20% off. Plan your retirement (early, normal, before, and after), plus non-recurring financial goals (such as child education) and recurring financial goals (such as holidays and appliance purchases). The tool helps anyone aged 18 to 80 plan for retirement, plus six non-recurring and four recurring financial goals, with a detailed cash flow summary.
- Our Flagship Course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,500 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market conditions! Watch the first lecture for free! One-time payment! No recurring fees! Lifelong access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
- Join the freefincal investor circle! An exclusive space for investors, advisors, fintech employees and students to access financial planning and insurance tools, mutual fund and stock analysis tools, coding strategies and Excel macros for data extraction. 750+ members are now part of our investor circle.
- Increase your income by getting people to pay for your skills! More than 900 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner seeking more clients through online visibility, or a salaried individual looking for side or passive income, we will show you how to do it by showcasing your skills and building a community that trusts and pays you. (Watch the 1st lecture for free). One-time payment! No recurring fees! Lifelong access to videos!
- Portfolio Tracker! Track your mutual funds and stock investments with our Google Sheet!
- We also publish monthly screeners for
Our Podcast: Let's Get Rich With Pattu
On Spotify: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! On Audible: Listen to the Let's Get Rich with Pattu Podcast
Listen to the Let's Get Rich With Pattu podcast on YouTube.
Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
Dr M Pattabiraman giving a lecture
- Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras.
- He has over 14 years of experience publishing news analysis, research and financial product development. He has over 28 years of teaching and research experience. He is also a public speaker and keynote presenter.
- He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free, AUM-independent investment advice.
- Connect with him via @pattufreefincal on X LinkedIn YouTube
- Pattabiraman has co-authored three print books.
This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want. 
Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
Feedback from a young reader after reading Chinchu Gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from a young age. The importance of money management and decision-making based on their wants and needs. Very nicely written in simple terms. - Arun.
About freefincal & its content policy
Freefincal is a News Media organisation dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact Information: To get in touch, please use our contact form. (Sponsored posts or paid collaborations will not be entertained.)Our publications
- Your Ultimate Guide to Travel. This is an in-depth exploration of vacation planning, including how to find affordable flights, budget accommodations, and practical travel tips. It also examines the benefits of travelling slowly, both financially and psychologically, with links to relevant web pages and guidance at every step. Get the PDF for Rs 300 (instant download)
- How to profit from content writing: Our ebook is for those interested in getting a side income via content writing. It is available at a 50% discount for Rs. 500 only!