The performance of HDFC Equity fund is reviewed using the sliding NAV chart tool available at Value Research. MorningStar and thefundoo. also have similar tools. Naturally this is not a sophisticated way to review mutual fund performance. However, it is a simple, yet powerful way to gain insights about fund performance.
I have tried my hand at making a 7-minute video out of this. Hope it is watchable. If the chart appears too small, please use the full-screen option. Yes, I should made the VR window full screen. I wanted to get rid of an advt on the side. Apologies for this crude attempt.
I would like to reiterate that investors should evaluate fund performance only from the time that they started investing in the fund and not rely on star ratings. Performance depends on when we choose to analyze and over what period. Prashant Jain has always maintained that 3 or even 5 years is too short a time to expect returns from equity. I agree because data supports his stand. See: What Return Can I Expect From Equity Over the Long term? Part 1
You might say, that I am fixing the 7-year window (5-year window is also fine, suggest you try it with 5) with the benefit of hindsight. While this is true, the bigger issue is that investors are impatient and not willing to wait. Switching to a fund that is “currently doing well” is also done with the benefit of hindsight. Either way, there is no guarantee of performance. I could be wrong, and you could be right. Only time will tell.
As for fund size, he keeps pointing out that it is still much smaller than the size of the market. While this is true, the large size seems to have affected the churn ratio of the fund: Mutual Fund Size vs. Performance: A Case Study. It is impossible to prove whether size has affected performance or not.
As mentioned in the video, this is a simple way of analysing performance consistency. One can use the Mutual Fund SIP Rolling Returns Calculator or the Multi-index Mutual Fund Rolling Returns Calculator for deeper analysis. I will try and make a video of this.
Do let me know your feedback on the video.
Buy our New Book!You Can Be Rich With Goal-based Investing A book by P V Subramanyam (subramoney.com) & M Pattabiraman. Hard bound. Price: Rs. 399/- (Rs. 359/- at Amazon.in). Read more about the book and pre-order now!