A reader says, “I get the rebalancing and how the backtests prove how it works for most market conditions. But what about the quality of the assets we have chosen for investment?” “For example, if an Adani like situation arises for a fund house? How do we handle that? Well, one may say we must…

A member of the freefincal investor circle asks, Can we use the information ratio to analyze index funds? What is the information ratio? It is a measure of outperformance per unit risk associated with the outperformance. In other words, the information ratio is a risk-adjusted measure of the fund manager’s effectiveness in beating the benchmark. How…

A reader asks, “How important is turnover ratio in choosing a mutual fund? While selecting an index fund, should Turnover ratio be considered?” The portfolio turnover ratio is the lower of the total of new stocks purchased or sold over 12 months, divided by the fund’s average assets under management (AUM). For example if a…

A reader asks,  “If I pick any so-called large or mid cap schemes and if I check returns more than ten years, they have at least 12% CAGR and above. If my time horizon is above ten years and I’m happy with a 12% CAGR, can I stick to only one good fund and do…

A reader wants to know if he can expect “10% per annum” if the investment period is a “minimum of five years”. Again, regular readers of freefincal might dismiss this as a newbie mistake, but it is a common mistake and deserves some attention. The first point to appreciate is unless we are investing in…

A reader asks, “In your experience, what is the biggest mistake mutual fund investors make? Can you write an article about this?” This can be answered in three words! Shiny Object syndrome – most mutual fund investors, suffer from this, which is their biggest mistake. The trailing one-year return is often the only factor an investor…

A reader wants to know if investing in an ESG-themed mutual fund is worth it. So some numbers and some discussion. In general, all thematic funds are unnecessary. The same logic applies to ESG, which gives off a “saving the planet vibe”! What is the Environmental, Social and Governance (ESG) investment theme? It involves choosing…

A reader says, “Please advise which small cap mutual fund I should include in my portfolio?” The short answer: There is no need for small cap funds in any investment portfolio! Regular readers are maybe aware of our stance on small cap mutual funds: Why a SIP in Small Cap Mutual Funds is a waste…

It is widely recognized that stock market returns tend to be clustered, with significant gains followed by years of disappointment. In this article, we examine the yearly and monthly returns of the Sensex from April 1979 and demonstrate that the annualized return after 44 years is primarily determined by just a handful of successful years/months….

The amendment to the finance bill 2023 modifying the tax status of debt funds seems to have rendered many investors in turmoil. They seem desperate to invest in debt funds before 1st April – we recommend that you don’t: Should I invest a lump sum in debt mutual funds before 1st April 2023? They seem…

With the change in the taxation of debt fund units purchased on or after 1st April 2023, the focus shifts on (1) the change in the investment mandate of certain existing schemes, (2) the launch of balanced hybrid funds (these can hold 40-60% equity) and (3) equity savings funds. In our coverage of this topic,…

An additional benefit in the new tax regime has been approved in the budget amendment to the finance bill 2023. We have modified our free New Tax Regime vs Old Tax Regime Calculator to reflect this change. Before the amendment, a person with a net taxable income of Rs. 7 lakhs paid no tax in…

The govt has amended the financial bill 2023 to remove the LTCG taxation at 20% with indexation for mutual funds holding 35% of lower Indian equity. The gains from such funds will be taxed as per slab, regardless of the age of the unit. This rule applies to purchases made on or after 1st April…

A YouTube viewer in response to our recent video – Do not stop or redeem your equity investments! Now is the best time to invest! – responded: “Thank you, Pattu Sir, I am continuing with my SIPs with 45:55 Allocation (Equity: Debt). So, is it ok to put a LumpSum at this time as my…

In our coverage of the change in debt mutual fund taxation rule from 1st April 2023, we have pointed out that several funds will modify their investment mandate. See: Debt mutual funds to be taxed as per slab from 1st April 2023! And Will SEBI help investors and AMCs tackle the debt fund taxation rule change? Freefincal investor…