My Handpicked Mutual Funds January 2019 (PlumbLine)

Published: December 30, 2018 at 9:59 am

Last Updated on February 12, 2022 at 6:18 pm

PlumbLine is my list of handpicked mutual funds. This was started in Sep 2017 for beginners to accompany the freefincal robo advisory template. This is the January 2019 edition. There are seven changes in funds and fund categories.  If you are seeing this for the first time, please take a couple of minutes to understand what this list is, how it has been compiled and how you should use it. If you are aware of this list, please do not just look for changes to fund names.

What is plumbline and how should I use it?


My Handpicked Mutual Funds: PlumbLine A plumb line is used to fix the vertical and therefore the horizontal. This list hopes to help new investors do the same.
Pic credit: Mr. atm

1: PlumbLine is a boring list of mutual funds. It will NOT change from month to month unless there is a significant change in the fund’s strategy or dip in performance or some other special situation. So please do not look forward to it. Also, there are plenty of good mutual funds that are not part of Plumbline. If your funds are different, you are probably better off. Do not worry about it.

2: Do not use PlumbLine for confirmation of your choices! PlumbLine is meant for young earners and first-time investors after they have used the robo advisory template.


Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

3: If tomorrow the funds in the list change, you will have to take a call on what you need to do, based on the fund performance from the date in which you invested. I cannot help you here, other than talk about how to review.

4: This is a personalized list and will be subject to my biases. I invest with a bias to get things done and analyze without bias to present facts. So please bear that in mind. Don’t waste your time and mine asking “why are you biased towards Quantum and Franklin?”, “Why is X or Y fund not here?”, “Z is a better choice”. This list is meant for new mutual fund investors to get going.

Disclaimer

On its own, this list has no meaning and unless you are able to look at it in the right perspective and context, it will not help you. The hope is that the robo template will try and provide such perspective which still has to be processed and interpreted by you.

Finally, I am only human and more than capable of making mistakes. Also, I am a below average investor and fund picker or analyzer. I am not a fan of looking into the fund portfolio. I prefer funds with a narrow investment mandate. I am sure you will agree that most of the picks are lame and obvious.and that this list is a no-brainer and nothing special.

If the funds here stop performing in future or have credit defaults issues, all I can do is to modify the list (if required). I WILL NOT BE IN ANY WAY RESPONSIBLE FOR YOUR INVESTMENT CHOICES, CAPITAL GAINS OR LOSSES.

If a PlumbLIne fund is present in your portfolio, it means nothing.

If none of your funds is present in the PlumbLine list, it means nothing.

MUTUAL FUNDS ARE SUBJECT TO IGNORANCE RISKS AND MARKET RISKS. PLEASE READ AND UNDERSTAND ALL SCHEME RELATED DOCUMENTS BEFORE INVESTING.

FAQ on Plumbline

1. Why are X, Y or Z funds not part of plumbline —> Plumbline is my list. Don’t expect me to make a list that matches your expectations.

2. The funds you have listed are not even 4-star funds —> I don’t care. Star ratings are injurious to your mental and fiscal health. Comparisons are injurious to peace of mind and plumbline is just plain bad.

3 Plumbline does not feature the top funds from your monthly screener —> Yeah because I did not consult it. Plumbline is a qualitative assessment of a funds investment strategy, mandate and performance. Update: From this edition, some choices will reflect the performance in the screener.

4: I find your list biased and partial to certain funds and certain AMCs –> Okay then, thank you for not using it.

Plumbline January 2019

Category 1: Overnight mutual funds

To understand the basics, read Worried about risk in debt mutual funds? Park your money in overnight mutual funds

  • Investment Duration one day and above!
  • Fund name L&T Cash Fund-Direct Plan Growth Option
  • Nature ultra-conservative!
  • interest rate risk: practically nil
  • Credit risk non-zero but quite small
  • Why? This is a new category and this fund has the highest AUM with the lowest expense ratio. Other than that nothing special
  • Suitable for the super scared who want to park money for a short while
  • Returns You invest in this for safety, not for returns

Category 2: Liquid Fund

  • Investment Duration Few months and above
  • Fund name Quantum Liquid fund Direct Plan Growth Option
  • Nature Conservative
  • interest rate risk: low (can give losses if RBI rate is suddenly increased by a huge amount, but will recover in days)
  • Credit risk low
  • Why? Does not chase after returns by taking on credit risk (after SEBI recategorization, the differences among liquid funds could have reduced. Need to check)
  • Suitable for use for parking money
  • Returns a bit more than SB account
  • Con: There are funds with lower expense ratio. You can choose them, but be sure you understand where the fund will invest. See: How to Choose a Liquid Mutual Fund
  • Why is it rated one star? Do not chase after star ratings, especially liquid funds! It will come back and bite you.

Category 3: Equity Arbitrage

  • Duration 1Y and above
  • Fund name UTI Arbitrage fund direct plan growth or ICICI Equity Arbitrage Fund-Direct Plan Growth Option.
  • Nature Low volatility by construction. Volatile for less than a year. Quarterly returns can be negative
  • interest rate risk: low Applicable to bond part of the portfolio. This is largely an equity fund
  • Credit risk low Applicable to bond part of the portfolio. UPDATE: After the SEBI recategorization, arbitrage funds only need to hold 65% in derivatives. Rest are in bonds. So these funds can be subject to credit and interest rate risks.
  • Other risks There are small but complex risks involved, but if you choose the investment duration right, the main risk will be fund delivering lower than expected return. So expect less!
  • Why? Pure arbitrage funds with no direct (unhedged) equity (65%)
  • Suitable for use for parking money and generating income. See: Generating tax-free income from arbitrage mutual funds
  • Returns Expect about 6% ish pre-tax
  • Con: You need to understand how the product work. Try this How Arbitrage Mutual Funds Work: A simple introduction

Category 4: Ultra short term (low risk)

  • Duration 1Y and above
  • Fund name Franklin India Savings Fund-Direct Plan Growth
  • Nature Conservative but expect day to day NAV ups and downs.
  • interest rate risk: low
  • Credit risk low-medium
  • Why? This is will now invest only in money market instruments with low to moderate credit risk
  • Suitable for use for saving money and generating income
  • Returns Expect FD-like returns (lower tax if you want for 3Y)

Category 5: Ultra short-term (medium-high risk)

  • Fund Type Debt: Ultra short-term (medium-high risk)
  • Duration 1Y and above
  • Fund name Franklin India Ultra-Short Bond Fund – Super Institutional Plan – Direct Plan Growth Option
  • Nature: aggressive.  Don’t expect a joy ride!
  • interest rate risk: low
  • Credit risk medium-high
  • Why? If you must take credit risk chasing after high returns, do it with Franklin. The Macaulay duration will only be about 6-7 months or lower. So low-interest rate risk and medium-high credit risk.  Read more: Why you need to worry about “duration” if your mutual funds invest in bonds
  • Suitable for use for saving money and generating income.
  • Returns Expect it to beat FD returns (assuming no major default issue)
    Cons Min investment is Rs. 10,000

Category 6: Medium duration (medium-high risk)

  • Duration Strictly long term: More than 5Y, preferably much longer
  • Fund name Franklin India Income Opportunities Fund
  • Nature fairly aggressive. Don’t expect a joy ride!
  • interest rate risk: medium-high
  • Credit risk medium-high
  • Why? This can invest in all types of bonds with Macaulay duration of 3-4 years, with an option to tactically reduce to 1Y depending on rate movement. Will invest in high accrual bonds
  • Suitable for Use as debt component for long-term goals
  • Returns Expect it to beat FD returns (assuming no major default issue)

Category 7:  Debt: Corporate Bond (medium risk)

  • Duration: Strictly long term: More than 5Y, preferably much longer
  • Fund name: Franklin India Corporate Debt Fund-Direct Plan Growth option
  • Nature: Neither conservative nor aggressive
  • interest rate risk: medium-high
  • Credit risk: medium portfolio concentration risk: high
  • Why? This will invest in long-term bonds of corporate and PSUs rated AA+ and above
  • Suitable for: Use as a debt component for long-term goals (with or without equity).
  • Returns Expect it to beat FD returns (assuming no major default issue)

Category 8: Fund Type Debt: Credit risk (high risk)

  • Duration Strictly long term: More than 5Y, preferably much longer
  • Fund name Franklin India Credit Risk Fund Direct plan Growth option
  • Nature Aggressive Invests in low credit quality bonds (AA and below). Not for the faint-hearted
  • interest rate risk: medium-high
  • Credit risk high; portfolio concentration risk: high
  • Why? If you must take credit risk, take it with Franklin. They have the money to buy back junk bonds!
  • Suitable for Use as debt component for long-term goals
  • Returns Expect it to beat FD returns (assuming no major default issue)

Category 9: Equity Tax planning

  • Duration There is no need for ELSS mutual funds., but if you must use, use only for long-term goals with proper asset allocation.
  • Fund name Franklin India Tax Shield Direct Plan Growth Option 

    Aditya Birla Sun Life Tax Relief ’96 – Growth – Direct Plan or DSP Tax Saver Fund-Direct Plan Growth Option

  •  Nature multi-cap tilt
  • Why the change?  The Franklin fund has underperformed Nifty large mid cap 250 (N250) over 3,4 and 5 years. Perhaps this is due to its large cap tilt. The two replacements have done well against this index (more in a separate post) due to their multi-cap nature. Considering that ELSS funds are used typically by those at the start of their careers, I thought a change is suitable. Note that these two funds will be more volatile than Franklin Tax Shield. The DSP fund has better downside protection wrt N250 than the ABSL fund
  • Suitable for Use only if you have a proper asset allocation and if you cannot exhaust 80C with your expenses and fixed income instruments. Read more: Making the best use of section 80C for tax saving: an example

Category 10: Balanced fund (equity oriented) or Aggressive Hyrbid

  • Duration Treat all such funds as pure equity funds, so strictly long-term. Use robo template for allocation
  • Fund name
    • HDFC Hybrid Equity fund Direct plan growth option formerly HDFC Balanced or
    • Franklin India Equity Hybrid Fund formerly Franklin India Balanced Fund or
    • ICICI Equity & Debt fund
  • Nature Neither conservative nor aggressive
  • Risk Only a bit lower than diversified equity funds
  • Why? The HDFC fund is neither inconspicuous, nor a star, but a consistent performer with good downside protection. Franklin Balanced is an inconspicuous consistent performer but going forward will not have large cap tilt. ICICI fund has been included because of this review: ICICI Prudential Equity & Debt Fund (ICICI Balanced) Performance Review
  • Author note: I am invested in HDFC Hybrid Equity

Category 11:  Equity multi-cap

  • Duration Strictly long-term with proper asset allocation. Use robo template for allocation
  • Fund name Quantum Long Term Equity Value Fund-Direct Plan Growth Option or Parag Parikh Long Term Equity Fund
    Why? Very good downside protection resulting in consistent performance
    Who should use? Only those with low expectations, patience. Not suitable for star rating fans and daily portfolio “trackers” PPFAS is a new entrant.
  • Author Note: I invest in both funds (& HDFC balanced for my retirement). Many asked me why is PPFAS not part of PlumbLine when I am invested in it. Well okay, why not.

Category 12: Index funds (large cap)

  • Duration Strictly long-term with proper asset allocation. Use robo template for allocation
  • Fund name
  • Risks No downside protection
  • Who should use? If you wish to adopt a passive investing strategy (eliminate fund manager risks), and wish to track a less volatile large-cap index

Category 13: Index Fund (large + midcap) – high risk

  • Duration Strictly long-term with proper asset allocation. Use robo template for allocation
  • Fund name UTI Nifty next 50 direct plan growth option or ICICI Nifty Next 50 Direct Plan Growth Option or Reliance Junior Bees. See: What is the best way to invest in Nifty Next 50 Index?
  • Risks Can be extremely volatile, so tread with caution
  • Who should use? If you prefer a volatile index fund (with unmanaged risk) that has a very good track record of beating actively managed funds in all categories

Category 14: Index Fund (large + midcap)- low risk

  • Duration Strictly long-term with proper asset allocation. Use robo template for allocation
  • Fund name  Sundaram Smart NIFTY 100 Equal Weight Fund or Principal Nifty 100 Equal Weight Fund  Use 50% of one fund in Category 12 and 50% one fund in category 13. 
  • That is, 50% of a Nifty (or Sensex) fund and 50% of a Nifty Next 50 fund (let us call this the Nifty Blend).
  •  Why were the Sundaram and Principal funds removed? Because the Nifty blend has lower risk than these new low AUM funds from not so popular AMCs. See: Can I start Index investing with 50% Nifty 50 and 50% Nifty Next 50? (This study was made after the publication of Sep 2018 Plumbline)
  • Who should use?  Only those who appreciate the benefits of Index investing and will chase after stars or compare with peers. See: Will large-cap mutual funds struggle to beat Nifty 100 Equal Weight Index?

 Category 15: Equity Large Cap

Category 16 Balanced Advantage (Dynamic Asset Allocation)

  • Duration Strictly long-term with proper asset allocation. Use robo template for allocation. Use a core part of the equity portfolio.
  • Fund name ICICI Balanced Advantage Fund Direct plan Growth Option
  • Risks low (compared to aggressive hybrid funds)
  • Why  This has a fantastic track record with low volatility. See: ICICI Prudential Balanced Advantage Fund: Performance With Low Volatility

Category 17 Equity Midcap

  • Duration Strictly long-term with proper asset allocation. Use robo template for allocation. Do not exceed 40-50% within the equity portion.
  • Fund name Franklin India Prima Fund-Direct Plan Growth Option; HDFC Mid-cap Opportunities
  • Risks Aggressive
  • Why Because in the mid-cap and small-cap segments, it is crucial to choose consistent performers which no one is talking about. The Franklin fund has a decent track record and has managed to have a mid-cap tilt for most of its 23+ year existence. You need to give it time to work.
  • Note: ICICI Prudential Midcap Select ETF is a promising index option in this space. However, its liquidity has to be verified by giving some more time. So far it has done well.

Category 18 Equity Smallcap

  • Stay away from this segment. Most midcaps have all the small-cap exposure you need.

Summary of changes made in this edition

  1. Category 3 arbitrage: Update on high bond allocation and possible credit and interest rate risk
  2. Category 5 and 6: Risk profile increased from moderate to medium-high due to high A rated bonds
  3. Category 9: Fund changed due to poor performance with respect to Nifty large mid cap 250. Two new funds added
  4. Category 12: DSP Nifty 50 Equal Weight included
  5. Category 14: Nifty Blend introduced instead of Sundaram and Principal Nifty 100 Equal Weight Funds.
  6. Category 15: removed
  7. Category 16: Balanced advantage introduced

Closing Remarks

To understand the debt fund choices, you need to learn more about interest rate risk, credit rating risk, floating rate bonds, etc. You can download this free e-book if you are interested: Free E-book: A Beginner’s Guide To Investing in Debt Mutual Funds

I have a strong Franklin bias when it comes to debt funds for two reasons: they always make the product positioning clear to investors (who bother to read) – this is crucial. Interest rate risk is beyond their control as it is governed by market forces. They do take on quite a bit of credit risk and this does go bad often (we don’t always hear about it!), but if the bonds become junk, the AMC is wealthy enough to bail out the fund. I repeat that there is no point in questioning me about his bias. Unless we have biases, we will never get things done as an investor.

You would have a notice a tilt towards smart-beta or strategic index funds (Nifty Next 50 is an exception) in my writings. This is fact-based and hence PlumbLine will also reflect this. In this edition, readers may have also noticed that I have made changes taking into account the performance of the funds in my reviews and screeners.

It is not enough if you know how to choose a fund, it is important to review its performance. If you wish to know how to do this, see: How to review a mutual fund portfolio. You only need 1/2 funds to build a well-diversified equity portfolio.

Check out the latest videos from freefincal @ Youtube

Wish you all a happy and prosperous 2019!

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.

  • 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 with 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 over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr. 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, 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 what 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 you 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!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision-making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
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 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!
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 & it's 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
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished 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 Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis 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

Travel-Training-Kit-Cover-new This is an in-depth dive analysis 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)