Last Updated on May 17, 2016 at 11:43 pm
How many stocks does an equity mutual fund hold? It is related to the assets it is managing? It is related to performance relative to peers (aka star rating)?
Let use see if we can get some insights into these questions. I started digging around in this direction because I would like to do (yet another!) series on understanding volatility and would like to treat this post as part 1.
There is much to discuss or conclude this post. Let us just stare at the graphs and see what we can make out of it.
The data set
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
All equity large cap, mid and small cap, large and mid cap, multi-cap and ELSS funds listed in VR were considered.
The no of stocks listed for all funds with AUM above 1000 Cr along with their start rating was tablulated.
A few funds less than 1000 Cr were also chosen randomly. The entire is too big – 268 funds.
Note: In this post I am an analyst and not an investor. So I use star ratings in that capacity. They are flawed (see why here and here) but will still use them as a popular reference.
AUM (net assets) vs Star Rating
The y-axis is in log scale. There is (as expected) no correlation between AUM and Star rating.
There is no 5-star fund with AUM less than 100 Cr. Does that tell you something? Perhap that the AUM of a 5 star fund increases.
It probably soon drops a star. Notice how densely populated the 100-1000 Cr region is for 4-star funds.
Does the fact that there are 4-star funds with extremely low AUM point to herd mentality among distributors (esp. banks)?
There is also no 1-star fund with AUM above 1000 Cr. Until now that is. HDFC Equity might soon be one!
No of stocks vs. AUM
Not sure if the no of stocks mentioned at VR online is accurate. Hence the -approx.
Notice that as AUM increases, the no of stocks in the folio increases.
Fund with low AUM tend to have pretty much any number of stocks (18 or above in what was considered)
Funds with AUM greater than about 2500-3000 Cr tend to have at least 30 stocks or mine.
This is to manage the higher inflows.
ICICI Focussed bluechip started with 20 stocks in a turbulent market and now has 49 stocks, thanks to herding.
It is however impossible to comment if higher stocks affects performance. No of stocks seems to only point to the strategy of the fund management (or the lack of one!).
No of stocks vs. Star Rating
The average no of stocks in the data set considered is 51!
There is no correlation between no of stocks and star rating. Five star rated funds have 20-80 stocks in their folio!
More no of stocks does not have a bearing on performance. It just boils down to what the stocks are!
The only reason I did this study is to answer the titular question: How many stocks does an equity mutual fund hold?
I think one can safely conclude that practically all equity funds hold at least 20 stocks. Most funds, esp. the popular ones hold at least 40 stocks.
How is this information relevant? Easy to guess if you recall my objective.
To be continued …..
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
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 ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 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 condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 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 who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization 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: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)