Step-by-Step Guide to Selecting a Mutual Fund

Warren Buffet, in a letter to his shareholders said, ‘do not ask a barber if you need a haircut’. This applies to many situations in life. In the present context, ‘never ask someone in the financial advisory business, if mutual fund selection is hard’.

Selecting a mutual fund is not rocket science. It can be done by anyone. Of course it requires a bit of effort, nothing unnatural about that. Anything in life that is worth doing requires effort.

A while back I posted a pdf file which containuneven stepsed step-by-step instructions to choose a mutual fund. It was well received by many readers. Now that the blog has a much higher readership I would like to re-post the calculator, in the hope that it can be made better with more feedback.

Objectives behind this guide:

  • Create a resource which is simple to understand and easy to use.
  • With a bit of practice, a user should be able to shortlist good mutual funds within 15-20 minutes. It makes no difference if someone takes an hour or a few days. The point is to illustrate how easy fund selection is once you have the right perspective.
  • Mutual funds can be analyzed in many, many ways. The guide should at least use many of important analysis methods.
  • It should first explain in a simple way what the results from the analysis signify.
  • The fund selection must be completely objective. That is it should depend only the results of the analysis. It should take into account long time performance and should not go by fund ratings.

Notes:

  • The guide deals with equity mutual funds. Debt mutual funds are a different ball game. I have mentioned several times in the blog regarding debt mutual fund selection. Shall put them together soon.
  • Before investing in equity, it is important to understand the nature of stock market returns.
  • The guide is based on the resources available at Value Research Online. Other resources like Money Control and Morning Star can also be used.
  • I have not included the evaluation of the fund with respect to its benchmark. I think the analysis methods used in the guide account for this indirectly.
  • Graphical evaluation of long term performance with respect to fund-benchmark like Money Control does is indeed useful. I am working on a guide to evaluate funds we hold. I will incorporate the above feature there.
  • I have personally used this method to choose the funds that I hold.
  • The idea is not to choose ONE fund. The idea is to short-list a few good funds. I am convinced that choosing any fund from the short-list will work for the long-term investor.
  • Evaluating the fund manager or management team, looking at the stability of the fund house, the style of the manager, how often he/she churns the portfolio, the kind of stocks he/she holds are not considered.
  • Such factors are important. However, the long-term performance of a fund should reflect these factors.
  • My primary aim is to show investors how to choose a large-cap fund quickly but objectively. I am convinced the method will work with any type of fund.
  • I make no claim that this is the best such guide or that it is even useful. This is written by a student of personal finance.

Feed back:

  • How can we make this better?
  • What do you think is missing from the point of view of a beginner?
  • What is missing from the point of view of a more advanced user?
  • If you think this is not useful, please let me know specifically what you think is wrong or should be changed.

Update:

June 2015

Part 1: How to select an equity mutual fund -preamble

Part 2: How to select an equity mutual fund – Creating a shortlist

Part 3: How to select an equity mutual fund – Making a Choice!

Now you can use the Automated Mutual Fund Screener to create the shortlist!

Download the combined PDF version of the updated mutual fund selection guide

Dec. 2012 

Download the Step-By-Step Guide to Selecting a Mutual Fund

 

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181 thoughts on “Step-by-Step Guide to Selecting a Mutual Fund

  1. nikhil

    pattu sir the guide is excellent .....but i want you to throw some more light on alpha,beta,r-squared and std deviation part..........what i mean is..... are there any standard ranges to be followed.....or they will vary according to funds selected...for eg beta "1" is for the market.......so what will we define as "market" in this case.........i am only asking for the large cap funds.....becoz i have only studied that part......

    Reply
    1. pattu

      There are no standard ranges. Once must be aware of the extreme values of the measures and choose something which one is comfortable with. Of course these will change with time.

      the index is the benchmark index. for large cap funds this is easy because it will either be Sensex or Nifty. Multi-cap funds have more than one benchmark. I don't know exactly how it is calculated in this case and can only guess. However,the range of the parameters are the same.

      Reply
  2. nikhil

    pattu sir the guide is excellent .....but i want you to throw some more light on alpha,beta,r-squared and std deviation part..........what i mean is..... are there any standard ranges to be followed.....or they will vary according to funds selected...for eg beta "1" is for the market.......so what will we define as "market" in this case.........i am only asking for the large cap funds.....becoz i have only studied that part......

    Reply
    1. pattu

      There are no standard ranges. Once must be aware of the extreme values of the measures and choose something which one is comfortable with. Of course these will change with time.

      the index is the benchmark index. for large cap funds this is easy because it will either be Sensex or Nifty. Multi-cap funds have more than one benchmark. I don't know exactly how it is calculated in this case and can only guess. However,the range of the parameters are the same.

      Reply
  3. nikhil

    pattu sir step one is to choose the funds.............how to keep reviewing them.......should it be done yearly.....?

    Reply
    1. pattu

      monitor closely. At least twice a year. Every fund will have a bad patch. A fund with good history can be given around 2-3 years to recover. So you need to choose well and be patient, but keep a close eye.

      Reply
  4. nikhil

    pattu sir step one is to choose the funds.............how to keep reviewing them.......should it be done yearly.....?

    Reply
    1. pattu

      monitor closely. At least twice a year. Every fund will have a bad patch. A fund with good history can be given around 2-3 years to recover. So you need to choose well and be patient, but keep a close eye.

      Reply
    1. pattu

      Yes it is. What I don't like about fund rankings is the duration. Crisil uses 3Y. VR online 3 and 5Y average etc. That is too small a time for equity instruments.

      Also ranking is relative. I am only interested in the funds cagr relative to what I need for my goal. As long as the fund has a decent history and returns are not too abysmal, I will not change funds. In fact, I never have.

      Reply
    1. pattu

      Yes it is. What I don't like about fund rankings is the duration. Crisil uses 3Y. VR online 3 and 5Y average etc. That is too small a time for equity instruments.

      Also ranking is relative. I am only interested in the funds cagr relative to what I need for my goal. As long as the fund has a decent history and returns are not too abysmal, I will not change funds. In fact, I never have.

      Reply
  5. Pankaj

    Thank you very much for your great articles,Your hard work is appreciated..........

    what is your openion about HDFC top 200 fund
    I article 2 you have suggested ICICI pru. focused blue chip and FI Blue chip.
    however in article 3 you have suggested HDFC top 200.
    I am confused as i have invested lumsum in HDFC top 200 two yers back and now i want to start SIP of 10000, which one i should choose, Shpuld i continue with top 200 or should open new SIP with FI Bluechip.
    Kindly Advise.

    Reply
    1. pattu

      Hi Pankaj,

      Thank you very much. For your investments, assuming you don't need the money for seven years or more(preferably more!)I would suggest that you leave the investment in Top 200 as is. You consider ICICI Blue Chip and one small and mid-cap fund like IDFC Premier equity or a multi-cap fund like PPFAS Long term value fund.

      FI Blue Chip instead of ICIC Foc. blue chip should also be fine.

      Reply
  6. Pankaj

    Thank you very much for your great articles,Your hard work is appreciated..........

    what is your openion about HDFC top 200 fund
    I article 2 you have suggested ICICI pru. focused blue chip and FI Blue chip.
    however in article 3 you have suggested HDFC top 200.
    I am confused as i have invested lumsum in HDFC top 200 two yers back and now i want to start SIP of 10000, which one i should choose, Shpuld i continue with top 200 or should open new SIP with FI Bluechip.
    Kindly Advise.

    Reply
    1. pattu

      Hi Pankaj,

      Thank you very much. For your investments, assuming you don't need the money for seven years or more(preferably more!)I would suggest that you leave the investment in Top 200 as is. You consider ICICI Blue Chip and one small and mid-cap fund like IDFC Premier equity or a multi-cap fund like PPFAS Long term value fund.

      FI Blue Chip instead of ICIC Foc. blue chip should also be fine.

      Reply
  7. Jayan

    Dear Pattu,
    Yes I already read your articles and it really helped me , thanks
    My goal is 10-15yr , not more than 15yr, please advice

    Reply
    1. pattu

      Thank you. For a 10+ year goal, you can use
      Franklin blue Chip Equity + Quantum Long term Equity
      or
      FIBCF + ICICI Pru Discovery.
      Or you can even opt for a single fund: HDFC Balanced.

      All of them are equally good combinations.

      Reply
  8. Jayan

    Dear Pattu,
    Yes I already read your articles and it really helped me , thanks
    My goal is 10-15yr , not more than 15yr, please advice

    Reply
    1. pattu

      Thank you. For a 10+ year goal, you can use
      Franklin blue Chip Equity + Quantum Long term Equity
      or
      FIBCF + ICICI Pru Discovery.
      Or you can even opt for a single fund: HDFC Balanced.

      All of them are equally good combinations.

      Reply
  9. Jayan

    Thank you
    When I analyzed as per your calculation from valuresearch.com I found
    ICICI Pru Focused BlueChip is better than FI Blue chip, pleae provide your idea

    Reply
    1. pattu

      ICICI bluechip is a newer fund but has performed well. Soon because of increase in size its performance may decrease. While it is certainly a good buy, one should monitor is more. Franklin bluechip is 20 yr old fund and is a consistent performer.

      You can go with the ICICI fund but do keep a close watch on performance. Not saying you should immediately exit if there is a drop but just keep any eye.

      Reply
  10. Jayan

    Thank you
    When I analyzed as per your calculation from valuresearch.com I found
    ICICI Pru Focused BlueChip is better than FI Blue chip, pleae provide your idea

    Reply
    1. pattu

      ICICI bluechip is a newer fund but has performed well. Soon because of increase in size its performance may decrease. While it is certainly a good buy, one should monitor is more. Franklin bluechip is 20 yr old fund and is a consistent performer.

      You can go with the ICICI fund but do keep a close watch on performance. Not saying you should immediately exit if there is a drop but just keep any eye.

      Reply
  11. Jayan

    Thank you sir, I analyzed as per mentioned value here and FI Blue chip have very low alpha.
    This reason I didnt consider FIBC.
    ICICI PRUDENTIAL FOCUSED BLUECHIP - Alpha -4.24, beta - 0.93, risk - Below Avg, star - 5
    FI Blue chip - Alpha -0.04, beta - 0.86, risk -below avg Below Avg, star - 3
    ICICi pru top 100 - Alpha -4.87, beta - 0.93, risk - Below Avg, star - 5
    I already have below funds and planing 1 Large Cap and Large & Mid Cap .

    Existing funds, here i think hdfc top 200 and equity is not good so need better LC and LMC
    EQUITY / SBI Emerging Businesses Fund - Regular Plan - Growth
    EQUITY / SBI Blue Chip Fund - Regular Plan - Growth
    HDFC Top 200 Fund (G)
    HDFC MidCap Opportunities (G)
    HDFC Equity Fund (G)

    Please note my final decision is as per your suggestion.

    Reply
    1. pattu

      Fine Jayan. You can go with ICICI Blue chip. Just keep in mind that it is a new fund. That is all.

      Reply
  12. Jayan

    Thank you sir, I analyzed as per mentioned value here and FI Blue chip have very low alpha.
    This reason I didnt consider FIBC.
    ICICI PRUDENTIAL FOCUSED BLUECHIP - Alpha -4.24, beta - 0.93, risk - Below Avg, star - 5
    FI Blue chip - Alpha -0.04, beta - 0.86, risk -below avg Below Avg, star - 3
    ICICi pru top 100 - Alpha -4.87, beta - 0.93, risk - Below Avg, star - 5
    I already have below funds and planing 1 Large Cap and Large & Mid Cap .

    Existing funds, here i think hdfc top 200 and equity is not good so need better LC and LMC
    EQUITY / SBI Emerging Businesses Fund - Regular Plan - Growth
    EQUITY / SBI Blue Chip Fund - Regular Plan - Growth
    HDFC Top 200 Fund (G)
    HDFC MidCap Opportunities (G)
    HDFC Equity Fund (G)

    Please note my final decision is as per your suggestion.

    Reply
    1. pattu

      Fine Jayan. You can go with ICICI Blue chip. Just keep in mind that it is a new fund. That is all.

      Reply
  13. Jayan

    Dear Puttu, please find 4 funds details and suggest.
    Risk Beta Alpha R Sq Expense ratio
    Franklin India Bluechip Below Avg. 0.86 0.04 0.96 2.16
    ICICI Prudential Top 100 Below Avg. 0.93 4.87 0.93 2.67
    ICICI Pru Focused BlueChip Low 0.88 4.24 0.97 1.2
    Hdfc balanced Below Avg. 0.87 4.79 0.8 1.81

    Please note my final decision is as per your suggestion.

    Reply
    1. pattu

      Fine Jayan. You can go with ICICI Blue chip. Just keep in mind that it is a new fund. That is all.

      Reply
  14. Jayan

    Dear Puttu, please find 4 funds details and suggest.
    Risk Beta Alpha R Sq Expense ratio
    Franklin India Bluechip Below Avg. 0.86 0.04 0.96 2.16
    ICICI Prudential Top 100 Below Avg. 0.93 4.87 0.93 2.67
    ICICI Pru Focused BlueChip Low 0.88 4.24 0.97 1.2
    Hdfc balanced Below Avg. 0.87 4.79 0.8 1.81

    Please note my final decision is as per your suggestion.

    Reply
    1. pattu

      Fine Jayan. You can go with ICICI Blue chip. Just keep in mind that it is a new fund. That is all.

      Reply
  15. Jayan

    Thanks Puttu,
    Can go with FI Blue chip+ICICi blue chip
    If you see any issue in new funds then I will go with FIBC

    Reply
  16. Jayan

    Thanks Puttu,
    Can go with FI Blue chip+ICICi blue chip
    If you see any issue in new funds then I will go with FIBC

    Reply
  17. Jayan

    I see any difference in the value btwn the below, which one i need to select
    ICICI Prudential Focused Bluechip Equity Inst I - risk low, expse ratio -1.20
    ICICI Prudential Focused Bluechip Equity Reg - risk below avg, expse ratio 2.3
    ICICI Prudential Focused Bluechip Equity Direct

    Reply
  18. Jayan

    I see any difference in the value btwn the below, which one i need to select
    ICICI Prudential Focused Bluechip Equity Inst I - risk low, expse ratio -1.20
    ICICI Prudential Focused Bluechip Equity Reg - risk below avg, expse ratio 2.3
    ICICI Prudential Focused Bluechip Equity Direct

    Reply
  19. Jayan

    Dear Pattu, I read institutional have been stopped and now only reg. so in this case FIBC better I think. But worry on FIBC's alpha value.pls suggest
    Also do I need to restructure my existing portfolio

    Reply
  20. Jayan

    Dear Pattu, I read institutional have been stopped and now only reg. so in this case FIBC better I think. But worry on FIBC's alpha value.pls suggest
    Also do I need to restructure my existing portfolio

    Reply
  21. Jayan

    Dear Pattu, Thanks
    I was going through your advice on the below link of restructuring funds.
    My currect allocation started last month (feb 13)
    EQUITY / SBI Emerging Businesses Fund - Regular Plan - Growth -1000
    EQUITY / SBI Blue Chip Fund - Regular Plan - Growth -1000
    HDFC Top 200 Fund (G) -2000
    HDFC MidCap Opportunities (G) -1000
    HDFC Equity Fund (G) -1000

    Planning new Allocation -15000pm
    ICICI Pru Focused BlueChip Eq Fund or ,Franklin India Bluechip -5000
    Quantum Long-Term Equity Fund - 3000
    HDFC top 200 -2000
    sbi blue chip - 1000
    HDFC Equity - 1000
    ICICI Pru Discovery Fund (G) -1000
    SBI emerging -1000
    remove - HDFC MidCap Opportunities (G) -1000

    Kindly advice in restructuring

    http://www.jagoinvestor.com/forum/my-mf-portfolio-and-your-feedback-needed

    Reply
    1. pattu

      You will need to make a more informed decision on this. I will send you the link to my MF tracker. Enter all transactions in it and check the performance yourself. You can then decide which to throw out and which to keep.

      Reply
  22. Jayan

    Dear Pattu, Thanks
    I was going through your advice on the below link of restructuring funds.
    My currect allocation started last month (feb 13)
    EQUITY / SBI Emerging Businesses Fund - Regular Plan - Growth -1000
    EQUITY / SBI Blue Chip Fund - Regular Plan - Growth -1000
    HDFC Top 200 Fund (G) -2000
    HDFC MidCap Opportunities (G) -1000
    HDFC Equity Fund (G) -1000

    Planning new Allocation -15000pm
    ICICI Pru Focused BlueChip Eq Fund or ,Franklin India Bluechip -5000
    Quantum Long-Term Equity Fund - 3000
    HDFC top 200 -2000
    sbi blue chip - 1000
    HDFC Equity - 1000
    ICICI Pru Discovery Fund (G) -1000
    SBI emerging -1000
    remove - HDFC MidCap Opportunities (G) -1000

    Kindly advice in restructuring

    http://www.jagoinvestor.com/forum/my-mf-portfolio-and-your-feedback-needed

    Reply
    1. pattu

      You will need to make a more informed decision on this. I will send you the link to my MF tracker. Enter all transactions in it and check the performance yourself. You can then decide which to throw out and which to keep.

      Reply
      1. Mayuram

        Dear SIr,

        I find ur blog very much useful. I am an NRI and planning to come back to India with lumpsum. Any plan to give some advice. Also, I will be grateful if you give me link for the MF Tracker.

        Thanks

        Reply
        1. freefincal

          No I dont do financial advisory. If you scroll up the blog you will see links to both the MF tracker and list of fee-only financial planners. You can consult one of them.

          Reply
  23. Ashok

    Hi Pattu,

    I have a naive question regarding the documented returns of the MFs - are they pre-expenses returns or post-expenses returns? For example, all the returns given on sites like VRO, MS, etc. - are the returns given after deducting the fund houses' expenses?

    Please clarify 🙂

    Thanks in advance,
    Ashok

    Reply
    1. pattu

      Hi Ashok, the NAV declared and therefore the returns are post-expenses. This is independent of who reports it.

      Reply
  24. Ashok

    Hi Pattu,

    I have a naive question regarding the documented returns of the MFs - are they pre-expenses returns or post-expenses returns? For example, all the returns given on sites like VRO, MS, etc. - are the returns given after deducting the fund houses' expenses?

    Please clarify 🙂

    Thanks in advance,
    Ashok

    Reply
    1. pattu

      Hi Ashok, the NAV declared and therefore the returns are post-expenses. This is independent of who reports it.

      Reply
  25. JD

    Dear Mr Pattu,
    I have read your complete guide this one and also read your earlier review article on HDFC T200. Excellent simplest way of explaination. I am mentioning my queries with my requirement here under. if you can please spare little time, your response will be highly valuable to me.
    I am investing since last 2 yr as an SIP. my investment are as under and my requirement is after 10 Yr Minimum ( Child education / Retirement).
    QLTEF- 25000- WEEKLY
    FIBCF- 5000- MONTHLY
    HDFC T200- 5000 - MONTHLY
    IDFC PREMIER EQU- 3000- MONTHLY

    from your guide , i am confused now to as i have multicap , large and mid cap, large cap and mid cap all seperate fund i have inmy pf.

    My requirement is child education after 15 yr 1 crore and retirement after 20 Yr 2 crore .

    i have 5 lac as fd with 9 % rate which i am not going to touch for long period.

    Can you plese suggest about my fund selection?

    Thanks bro

    nJOy

    Reply
      1. JD

        Excellent tool.
        But create confusion as it shows 40 % overlapping within my all three funds. What will be the recommendations if found so.

        Reply
        1. pattu

          I expected it to be so. Assign FIBCF and QLTE in one folio and HDFC Top 200 and IDFC in another say, retirement. Please be mindful of this overlap when you make future purchases

          Reply
          1. AMOL

            Dear Pattu,

            Thank you very much for your great articles. The steps are very useful in deciding few good funds from so much of funds.
            Sir, I want your suggestion - Is name of Fund Manager also a factor for selecting MF?
            Sankran Naren, Anand Radhakrishnan, Kenneth Andred, Anoop Shah, Prashant Jain, Chirag setlewad and Anoop Bhaskar are some great managers and their funds are always on top.
            Please comment.

            AMOL

          2. JIG

            Dear Pattu,
            As u have pointed out correctly, I am planning to go with 10000 more and looking for advice on go with new fund or distribute with the already holding fund.considering minimising the overlapping
            I wana invest for my second child for higher education.

  26. JD

    Dear Mr Pattu,
    I have read your complete guide this one and also read your earlier review article on HDFC T200. Excellent simplest way of explaination. I am mentioning my queries with my requirement here under. if you can please spare little time, your response will be highly valuable to me.
    I am investing since last 2 yr as an SIP. my investment are as under and my requirement is after 10 Yr Minimum ( Child education / Retirement).
    QLTEF- 25000- WEEKLY
    FIBCF- 5000- MONTHLY
    HDFC T200- 5000 - MONTHLY
    IDFC PREMIER EQU- 3000- MONTHLY

    from your guide , i am confused now to as i have multicap , large and mid cap, large cap and mid cap all seperate fund i have inmy pf.

    My requirement is child education after 15 yr 1 crore and retirement after 20 Yr 2 crore .

    i have 5 lac as fd with 9 % rate which i am not going to touch for long period.

    Can you plese suggest about my fund selection?

    Thanks bro

    nJOy

    Reply
      1. JD

        Excellent tool.
        But create confusion as it shows 40 % overlapping within my all three funds. What will be the recommendations if found so.

        Reply
        1. pattu

          I expected it to be so. Assign FIBCF and QLTE in one folio and HDFC Top 200 and IDFC in another say, retirement. Please be mindful of this overlap when you make future purchases

          Reply
          1. AMOL

            Dear Pattu,

            Thank you very much for your great articles. The steps are very useful in deciding few good funds from so much of funds.
            Sir, I want your suggestion - Is name of Fund Manager also a factor for selecting MF?
            Sankran Naren, Anand Radhakrishnan, Kenneth Andred, Anoop Shah, Prashant Jain, Chirag setlewad and Anoop Bhaskar are some great managers and their funds are always on top.
            Please comment.

            AMOL

          2. JIG

            Dear Pattu,
            As u have pointed out correctly, I am planning to go with 10000 more and looking for advice on go with new fund or distribute with the already holding fund.considering minimising the overlapping
            I wana invest for my second child for higher education.

  27. AMOL

    Dear Pattu,
    Nice article again. Very useful for selecting 4-5 funds out of 1000 funds.
    Sir I have a query- Is Name of Fund Manager is also for selecting MF?
    Naren Sankaran, Anoop Bhaskar, Anand Radhakrishnan, Prashant Jain, Kenneth Andrade, Chirag setlewad, Anoop Shah are the people whose funds are always the best.
    awaiting your reply.

    AMOL

    Reply
  28. AMOL

    Dear Pattu,
    Nice article again. Very useful for selecting 4-5 funds out of 1000 funds.
    Sir I have a query- Is Name of Fund Manager is also for selecting MF?
    Naren Sankaran, Anoop Bhaskar, Anand Radhakrishnan, Prashant Jain, Kenneth Andrade, Chirag setlewad, Anoop Shah are the people whose funds are always the best.
    awaiting your reply.

    AMOL

    Reply
  29. Sriraam Kalingarayar

    Hello sir,
    I have been trying to learn from your step by step guide.. and awesome will be an understatement .
    i wanted to choose a Mf in equity : multi cap … and i chose Reliance growth Fund (10 yr rank -1) and Tata Ethical Fund ( 10 yr rank -4 ) .
    when i analyze the risk status of both
    sd sr beta alpha rsq
    Reliance Gr Fund - 20.72 0.27 1.05 1.85 0.82
    Tata ethical fund - 10.87 0.54 0.52 3.98 0.73

    when comparing , it says Tata fund has higher alpha and sharpe ratio , and lower std deviation.It will be the natural choice , right ? but then reliance Growth Fund has performed better in 10 yrs time. So i am confused … which one of them should i choose?

    and if i see another recent fund , Mirae Asset India-China Consumption Fund - Regular Plan, it has very good risk status reports, but it is a recent fund.. will it be too risky to choose that?

    Reply
    1. pattu

      Hi Sriraam, Thank you. Multi-cap funds are tricky because their mandates can vary a lot. Tata Ethical is a Shariah fund while Reliance Growth is a quant-based fund. Another in the list, Templeton India Growth fund is a value fund! So it can be quite confusing.
      So be careful before choosing them. I suggest you try large and mid-cap funds instead.
      Yes high alpha, high Sharpe and low std deviation is the way to go.

      Reply
      1. Sriraam Kalingarayar

        Thanks sir.

        I knew this multi cap ones are tricky. But just wanted to try the method for each category.

        Reply
  30. Sriraam Kalingarayar

    Hello sir,
    I have been trying to learn from your step by step guide.. and awesome will be an understatement .
    i wanted to choose a Mf in equity : multi cap … and i chose Reliance growth Fund (10 yr rank -1) and Tata Ethical Fund ( 10 yr rank -4 ) .
    when i analyze the risk status of both
    sd sr beta alpha rsq
    Reliance Gr Fund - 20.72 0.27 1.05 1.85 0.82
    Tata ethical fund - 10.87 0.54 0.52 3.98 0.73

    when comparing , it says Tata fund has higher alpha and sharpe ratio , and lower std deviation.It will be the natural choice , right ? but then reliance Growth Fund has performed better in 10 yrs time. So i am confused … which one of them should i choose?

    and if i see another recent fund , Mirae Asset India-China Consumption Fund - Regular Plan, it has very good risk status reports, but it is a recent fund.. will it be too risky to choose that?

    Reply
    1. pattu

      Hi Sriraam, Thank you. Multi-cap funds are tricky because their mandates can vary a lot. Tata Ethical is a Shariah fund while Reliance Growth is a quant-based fund. Another in the list, Templeton India Growth fund is a value fund! So it can be quite confusing.
      So be careful before choosing them. I suggest you try large and mid-cap funds instead.
      Yes high alpha, high Sharpe and low std deviation is the way to go.

      Reply
      1. Sriraam Kalingarayar

        Thanks sir.

        I knew this multi cap ones are tricky. But just wanted to try the method for each category.

        Reply
  31. Sriraam Kalingarayar

    Hello sir,
    I have been trying to learn from your step by step guide.. and awesome will be an understatement .
    i wanted to choose a Mf in equity : multi cap … and i chose Reliance growth Fund (10 yr rank -1) and Tata Ethical Fund ( 10 yr rank -4 ) .
    when i analyze the risk status of both
    sd sr beta alpha rsq
    Reliance Gr Fund - 20.72 0.27 1.05 1.85 0.82
    Tata ethical fund - 10.87 0.54 0.52 3.98 0.73

    when comparing , it says Tata fund has higher alpha and sharpe ratio , and lower std deviation.It will be the natural choice , right ? but then reliance Growth Fund has performed better in 10 yrs time. So i am confused … which one of them should i choose?

    and if i see another recent fund , Mirae Asset India-China Consumption Fund - Regular Plan, it has very good risk status reports, but it is a recent fund.. will it be too risky to choose that?

    Reply
  32. Sriraam Kalingarayar

    Hello sir,
    I have been trying to learn from your step by step guide.. and awesome will be an understatement .
    i wanted to choose a Mf in equity : multi cap … and i chose Reliance growth Fund (10 yr rank -1) and Tata Ethical Fund ( 10 yr rank -4 ) .
    when i analyze the risk status of both
    sd sr beta alpha rsq
    Reliance Gr Fund - 20.72 0.27 1.05 1.85 0.82
    Tata ethical fund - 10.87 0.54 0.52 3.98 0.73

    when comparing , it says Tata fund has higher alpha and sharpe ratio , and lower std deviation.It will be the natural choice , right ? but then reliance Growth Fund has performed better in 10 yrs time. So i am confused … which one of them should i choose?

    and if i see another recent fund , Mirae Asset India-China Consumption Fund - Regular Plan, it has very good risk status reports, but it is a recent fund.. will it be too risky to choose that?

    Reply
  33. Senthil

    Hi Pattu,

    Thanks a lot Pattu for your detailed steps. Based on the methods mentioned in the PDF, I have selected 2 Large Cap and 2 Mid & Small cap funds. But based on my selection, 3 of 4 funds are from the same fund house (ICICI). Is it better to have different fund house than investing mostly in same fund house? Quite confused on this point.

    Reply
    1. pattu

      Yes it is better to spread across different fund houses. Just choose the next in your short list belonging to a different fund house. Should be fine. Dont worry. Just do it.

      Reply
  34. Senthil

    Hi Pattu,

    Thanks a lot Pattu for your detailed steps. Based on the methods mentioned in the PDF, I have selected 2 Large Cap and 2 Mid & Small cap funds. But based on my selection, 3 of 4 funds are from the same fund house (ICICI). Is it better to have different fund house than investing mostly in same fund house? Quite confused on this point.

    Reply
    1. pattu

      Yes it is better to spread across different fund houses. Just choose the next in your short list belonging to a different fund house. Should be fine. Dont worry. Just do it.

      Reply
  35. Senthil

    Thanks Pattu, you made me to reinforce my belief on not putting all the eggs in same basket. For large cap, have decided on HDFC Top 200 and ICICI Focussed Bluechip. And mid-small cap, DSP Black Rock Micro Cap and ICICI Prudential Value Discover funds.

    I had initially planned to start SIP for 2500 on each of these funds, but given that Sensex is all time high, is it a good idea to start with 1000 on each of these and put remaining 1500 in an RD every month do a lump-sum when sensex comes down a little?

    These investments are for a period of 15 years or so, towards my long term goals.

    Reply
    1. pattu

      No. I think you should put in as much as possible in the market. On top of this if you get any lump sum invest that when the market dips a bit. Only a bit. If you wait for the big dip, you might wait a long time.

      Reply
  36. Senthil

    Thanks Pattu, you made me to reinforce my belief on not putting all the eggs in same basket. For large cap, have decided on HDFC Top 200 and ICICI Focussed Bluechip. And mid-small cap, DSP Black Rock Micro Cap and ICICI Prudential Value Discover funds.

    I had initially planned to start SIP for 2500 on each of these funds, but given that Sensex is all time high, is it a good idea to start with 1000 on each of these and put remaining 1500 in an RD every month do a lump-sum when sensex comes down a little?

    These investments are for a period of 15 years or so, towards my long term goals.

    Reply
    1. pattu

      No. I think you should put in as much as possible in the market. On top of this if you get any lump sum invest that when the market dips a bit. Only a bit. If you wait for the big dip, you might wait a long time.

      Reply
  37. N. T. Giri

    dear Pattu sir,

    I regularly read all your blogs and found that they are well studied.Thanks for this.However I need your valuable word on our investment.

    I have following funds in which I am investing through SIP since 2012.I request you very earnestly to advise as to whether I should continue with this or replace any of the funds. sir, we are total 4 family members who have 5 funds each. we are totally investing about 25 K each.

    1.Birla Sun Life India GenNext Fund - Gr 2.Birla Sun Life MNC Fund Gr 3.DSP BlackRock Top 100 Equity Fund Gr 4.Franklin India Smaller Companies Fund - Gr 5.HDFC Balance Fund Gr 6.HDFC Top 200 Fund - Gr. 7.ICICI Prudential Balanced Fund - Regular Gr 8.CICI Prudential Dynamic Plan- 9.ICICI Prudential Exports and Other Services Fund - Gr 10.ICICI Prudential Value Discovery Fund Gr 11.IDFC Premier Equity Fund - Regular Plan - Gr 12 Mirae Asset Emerging Bluechip Fund - Gr 13.Reliance Pharma Fund - Gr 14.SBI Emerging Businesses Fund - Regular Plan - Gr 15.SBI Magnum MidCap Fund - Gr 16.Tata Ethical Fund - Gr 17.UTI MNC Fund - Gr. 18. UTI Opportunities Fund - Gr .

    I will be oblised if you pl say few words on this.I am already registered with WordPress.com

    Thanks again.

    N. T. Giri

    Reply
    1. pattu

      This is a little too complicated for me to comment here. You can evaluate the performance of the funds with my return and risk analyser and decide for yourself.

      Reply
  38. N. T. Giri

    dear Pattu sir,

    I regularly read all your blogs and found that they are well studied.Thanks for this.However I need your valuable word on our investment.

    I have following funds in which I am investing through SIP since 2012.I request you very earnestly to advise as to whether I should continue with this or replace any of the funds. sir, we are total 4 family members who have 5 funds each. we are totally investing about 25 K each.

    1.Birla Sun Life India GenNext Fund - Gr 2.Birla Sun Life MNC Fund Gr 3.DSP BlackRock Top 100 Equity Fund Gr 4.Franklin India Smaller Companies Fund - Gr 5.HDFC Balance Fund Gr 6.HDFC Top 200 Fund - Gr. 7.ICICI Prudential Balanced Fund - Regular Gr 8.CICI Prudential Dynamic Plan- 9.ICICI Prudential Exports and Other Services Fund - Gr 10.ICICI Prudential Value Discovery Fund Gr 11.IDFC Premier Equity Fund - Regular Plan - Gr 12 Mirae Asset Emerging Bluechip Fund - Gr 13.Reliance Pharma Fund - Gr 14.SBI Emerging Businesses Fund - Regular Plan - Gr 15.SBI Magnum MidCap Fund - Gr 16.Tata Ethical Fund - Gr 17.UTI MNC Fund - Gr. 18. UTI Opportunities Fund - Gr .

    I will be oblised if you pl say few words on this.I am already registered with WordPress.com

    Thanks again.

    N. T. Giri

    Reply
    1. pattu

      This is a little too complicated for me to comment here. You can evaluate the performance of the funds with my return and risk analyser and decide for yourself.

      Reply
  39. Prasanta Biswal

    Dear Pattu Sir,
    I am very new to personnel investment and after reading your blog I was very much interested to explore and invest. Based on your PDF (how to choose MF) I have come up with below funds (ref taken as 10 years) in order of preferance
    Large cap:
    1.BNP Paribas Equity Fund
    2. ICICI Prudential top 100 fund - regular
    3. UTI Equity fund
    4. Franklin India blue chip

    Mid-small cap
    1. UTI Mid cap
    2. ICICI Prudential value discover fund regular plan
    3. Franklin India Prima fund
    4. PPFAS (this one based on some ref from my friends)

    I am planning to invest 2 funds from each. Could you please help me to identify the same.
    My Investment horizon is 10 - 15 years

    Thanks & Regards,
    Prasanta

    Reply
  40. Prasanta Biswal

    Dear Pattu Sir,
    I am very new to personnel investment and after reading your blog I was very much interested to explore and invest. Based on your PDF (how to choose MF) I have come up with below funds (ref taken as 10 years) in order of preferance
    Large cap:
    1.BNP Paribas Equity Fund
    2. ICICI Prudential top 100 fund - regular
    3. UTI Equity fund
    4. Franklin India blue chip

    Mid-small cap
    1. UTI Mid cap
    2. ICICI Prudential value discover fund regular plan
    3. Franklin India Prima fund
    4. PPFAS (this one based on some ref from my friends)

    I am planning to invest 2 funds from each. Could you please help me to identify the same.
    My Investment horizon is 10 - 15 years

    Thanks & Regards,
    Prasanta

    Reply
  41. Nuruzzaman Shamsuzzoha

    Dear Pattu Sir
    My heartfelt and sincere thanks for going that extra mile and writing some really interesting and useful articles for the benefit of the common masses. I hope you will continue this good work in future and enlightens us more with your sensible articles.

    Reply
  42. Nuruzzaman Shamsuzzoha

    Dear Pattu Sir
    My heartfelt and sincere thanks for going that extra mile and writing some really interesting and useful articles for the benefit of the common masses. I hope you will continue this good work in future and enlightens us more with your sensible articles.

    Reply
  43. JD

    Dear Pattu,
    After going through your complete guide , today i tried in detail for shortlisting one good large cap fund. My analysis data are as under:All 4 has 10 yr so has equally market updown cycle.

    LARGE CAP 10Y 5Y 3Y Std Dev Sharpe Ratio Beta Alpha R Squared EXP RATIO
    HT200 1/34 9/60 9/75 20.61 0.66 1.17 1.14 0.92 2.24
    FIBCF 5/3411/6040/75 15.99 0.61 0.92 -0.05 0.84 2.18
    ICICI TOP 100 3/34 6/60 2/75 16.84 0.95 0.95 5.9 0.92 2.77
    UTI Equity 6/34 3/60 3/75 15.71 0.93 0.9 5.03 0.93 2.13
    MIN 12.96 0.41 0.54 -3.1 0.49
    MAX 21.47 0.99 1.21 6.21 1
    My Query:
    FIBCF was discussed as consistant performance based on the above criteria a year ago. now today if i wana select only one large cap for longer run, The same dark horse still be under consideration?
    IF NOT, Should be required to our previous investment be reviewed and changed over?

    from Above, I pin down my choice to the UTI Equity Fund but then What we should think about our earlier HT200 investment??

    Sorry for little lenghty question but still, i think our Selection of MF Need further filtering..

    I must appreciate your time in advance for your all efforts put behind this fabulous site.

    keep it up dear

    JD

    Reply
    1. JD

      Dear,
      I am waiting for your opinion. I dont want plan to fail. i believe 75% plan and 25% execution and review.
      So please help me to choose wise for longer run.
      Thanks
      JD

      Reply
      1. pattu

        I think you can invest in one large cap and one one mid-small cap fund from the short list obtained by the above method. Should be fine. Do not overthink the problem. If you are not comfortable with T200, choose another fund.

        Reply
  44. JD

    Dear Pattu,
    After going through your complete guide , today i tried in detail for shortlisting one good large cap fund. My analysis data are as under:All 4 has 10 yr so has equally market updown cycle.

    LARGE CAP 10Y 5Y 3Y Std Dev Sharpe Ratio Beta Alpha R Squared EXP RATIO
    HT200 1/34 9/60 9/75 20.61 0.66 1.17 1.14 0.92 2.24
    FIBCF 5/3411/6040/75 15.99 0.61 0.92 -0.05 0.84 2.18
    ICICI TOP 100 3/34 6/60 2/75 16.84 0.95 0.95 5.9 0.92 2.77
    UTI Equity 6/34 3/60 3/75 15.71 0.93 0.9 5.03 0.93 2.13
    MIN 12.96 0.41 0.54 -3.1 0.49
    MAX 21.47 0.99 1.21 6.21 1
    My Query:
    FIBCF was discussed as consistant performance based on the above criteria a year ago. now today if i wana select only one large cap for longer run, The same dark horse still be under consideration?
    IF NOT, Should be required to our previous investment be reviewed and changed over?

    from Above, I pin down my choice to the UTI Equity Fund but then What we should think about our earlier HT200 investment??

    Sorry for little lenghty question but still, i think our Selection of MF Need further filtering..

    I must appreciate your time in advance for your all efforts put behind this fabulous site.

    keep it up dear

    JD

    Reply
  45. Kartick Krishnan

    Hi Pattu,

    Many thanks for some of the most wonderful blogs on personal finance that I have ever read in my life. Trust me what you are doing is philanthropy at its very best :). I have two questions on the step-by-step guide to select LCMF.

    1. In the step where you look at 7-yr rank of MFs, you did not directly select the first 4 that came up. Rather your selection appears to be(I may be wrong) based on whether the MF in question has a single digit ranking(less than 10) in other years as well. Correct me if I am wrong or am I missing something.

    2. If I have retirement and child education as 2 of my goals, is it ok to invest in the same MF separately for the 2 goals. In other words, can I have say 2 SIPs for different amounts in the HDFC T200 to keep track of the goals separately. Is this a good strategy?

    Thanks once again for all this work that you're doing.

    Regards
    Kartick Krishnan

    Reply
  46. Kartick Krishnan

    Hi Pattu,

    Many thanks for some of the most wonderful blogs on personal finance that I have ever read in my life. Trust me what you are doing is philanthropy at its very best :). I have two questions on the step-by-step guide to select LCMF.

    1. In the step where you look at 7-yr rank of MFs, you did not directly select the first 4 that came up. Rather your selection appears to be(I may be wrong) based on whether the MF in question has a single digit ranking(less than 10) in other years as well. Correct me if I am wrong or am I missing something.

    2. If I have retirement and child education as 2 of my goals, is it ok to invest in the same MF separately for the 2 goals. In other words, can I have say 2 SIPs for different amounts in the HDFC T200 to keep track of the goals separately. Is this a good strategy?

    Thanks once again for all this work that you're doing.

    Regards
    Kartick Krishnan

    Reply
  47. Prakash Warty

    The Valueline Reseach website pages have undergone changes . 7 years ranking is not displayed. We may have to stick to 5 years for long term ranking.

    Reply
    1. Kartick Krishnan

      Hi Prakash,

      I think for a long-term horizon 10-yr ranking would be a better indicator. But yes funds like ICICI Blu Chip won't figure in them. We can probably check both terms and choose the funds that rank in single digits for both periods - though I am no expert! Experts - what say?

      Reply
  48. Prakash Warty

    The Valueline Reseach website pages have undergone changes . 7 years ranking is not displayed. We may have to stick to 5 years for long term ranking.

    Reply
  49. Prakash Warty

    I am new to your post. I forgot to thank you for the excellent work you have done in preparing this document. I was looking for a system which I can always use for investing in funds. I found one now. Thanks again.

    Reply
  50. Prakash Warty

    I am new to your post. I forgot to thank you for the excellent work you have done in preparing this document. I was looking for a system which I can always use for investing in funds. I found one now. Thanks again.

    Reply
  51. jaimin

    thank you made this simple guide,but i have one doubt if we filter by putting on 7Y basis, shall we miss some good MF uner who is under 5Y or 3Y ?

    Reply
    1. pattu

      I am not asking to filter by 7Y basis. Use that as an anchor to see funds consistent over 10Y, 7Y, 5Y and 3Y periods. In any case VR online have removed the 7Y option. So you can use the 10Y period as anchor and check for consistency

      Reply
          1. Praveen Thomas

            Dear pattu sir,
            Thank you for your guide on MF selection, will be of great help for beginners like me.

            Your first filter criteria is a long term 10y fund. I don't understand when you say it is more seasoned. Because long term or short term both funds are going to invest in some stocks, which will mostly have good overlap for the same category. Fund managers also keep changing from time to time. So I don't understand how an age old fund can be more stable than a young fund. How the experience of that fund adds to its stability. Can you please clarify.....i don't know if I'm asking a very trival question. Sorry I'm a new bee.

            Thankyou very much for educating me,
            Praveen Thomas

          2. pattu

            Good point. It all depends on the management policy of the AMC. If it is good then who the actual fund manager is, does not matter. A fund which has seen the ups and downs of the market and has given good returns with downside protection is what I would choose. If you don't like past history, then there is not much to play with. I rely on funds with consistent performance. It could turn out right or wrong. I see it as some sort of foothold

  52. Umashankar Durgumahanti

    Sir
    i have read the pdf and it is very useful...i did shorlist the funds in the similar fashion....but in mid and small caps , the fund selection theory is different w.r.t to the large cap.....In the same logic if i do Franklin india smaller companies fund emerges as winner due to higher alpha and sharpe ratio.....otherwise if u go by the consevative approach as defined by parameters HDFC mid cap is the best.....the franklin is more volatile than hdfc....but even with less risk in long run of 5 & 7 years HDFC beats the franklin.....so my question is it necessary the risk in mid and small even though in long run less risky fund is beating the one with higher risk.....this is my observation sir......i will be glad to have your opinion on this

    Reply
  53. jaimin

    Dear pattu as per your guide i followed selection of funds basis on 10Y as on date,but none of them rated in top 5 funds are in low risk grade.
    guide me for this as i will like to select for my long term goal which is definetly more than 15Y away( excatly 33 years).

    Reply
  54. Praveen Thomas

    Dear Pattu sir,

    Thank you very much for this mutual fund selection guide. for a beginner this is very good. The definitions of those terms are nice and easy to understand.
    now i'm able to choose a mutual fund and a bit sure of what i'm doing also.

    Can you please add a simple definition for sortino also, value research is showing this in the risk page.

    regarding Standard deviation and beta, which is more important, should i give SD being small more weightage?

    same for Sharpe and Alpha, which is more important, should i give Alpha being large more weightage?

    Also I was thinking about automating this,

    Can we define a term called Rank Ratio and take the average over the years and see which fund has the lesser number,

    example in guide,

    rank ratio (franklin blue chip) = (1/25+2/37+2/47+5/66)/4 = the more lesser the number better is the fund.

    Also for risk analysis,

    Can we find the difference between the value and MIN,MAX ( which ever it should be) and take a weighted average for different categories.

    example in guide,

    franklin bluechip = AVERAGE( (SD - MIN(SD))*(1-weightage1) + (Sharpe - MAX(sharpe))*(1-weightage2) + (beta - MIN(beta))*(1-weightage3) ... etc ) = the more lesser the number the better is the fund.

    weightage1,2,3 will depend on largecap, mid, small etc.

    do you think with the above algorithm an automation is possible?

    thanks,
    Praveen Thomas

    Reply
  55. Praveen Thomas

    Dear Pattu sir,

    Thank you very much for this mutual fund selection guide. for a beginner this is very good. The definitions of those terms are nice and easy to understand.
    now i'm able to choose a mutual fund and a bit sure of what i'm doing also.

    Can you please add a simple definition for sortino also, value research is showing this in the risk page.

    regarding Standard deviation and beta, which is more important, should i give SD being small more weightage?

    same for Sharpe and Alpha, which is more important, should i give Alpha being large more weightage?

    Also I was thinking about automating this,

    Can we define a term called Rank Ratio and take the average over the years and see which fund has the lesser number,

    example in guide,

    rank ratio (franklin blue chip) = (1/25+2/37+2/47+5/66)/4 = the more lesser the number better is the fund.

    Also for risk analysis,

    Can we find the difference between the value and MIN,MAX ( which ever it should be) and take a weighted average for different categories.

    example in guide,

    franklin bluechip = AVERAGE( (SD - MIN(SD))*(1-weightage1) + (Sharpe - MAX(sharpe))*(1-weightage2) + (beta - MIN(beta))*(1-weightage3) ... etc ) = the more lesser the number the better is the fund.

    weightage1,2,3 will depend on largecap, mid, small etc.

    do you think with the above algorithm an automation is possible?

    thanks,
    Praveen Thomas

    Reply
  56. Shailee Anand

    Greetings Sir,

    I have gone through the PDF , it is very helpful

    as I had no knowledge on MF's and now reading hese articles on daily basis to get some financial knowledge.

    I know that u had taken these screen shots a couple of years ago and my question can be stupid(apologies) ,

    when i go to value research i am only getting the drop down for 5 years

    please help

    Reply
  57. PRADEEPKUMAR

    Hello, Thanks for this informative post. I am already investing for last few months in SIP mode in the following funds: Canara Robeco Emerging Equities (5000), HDFC-Mid Cap Opprtunities (5000), HDFC-Balanced Fund (5000), Mirae Asst India Opprtunities (5000). Can you suggest two good Large Cap funds to balnce my porfolio. I dont want to take too much risk. Some friends suggested, ICICI Focucssed Blue Chip, Quatum Long Term Equity or Franklin India Prima Plus. Your help will be inaluable

    Reply
  58. Ashish

    Great post Pattu!
    This is so systematic and simple that it will allow a lot of people to stop firing their guns in the dark.
    A quick question about the risk ratios. Are these over the lifetime of the fund or like trailing 1/3 year? Is there any normalisation that needs to be done to these values to make them comparable?

    Reply
  59. DoNotDisclose

    Dear Pattu,

    I suggest that you and the viewers read the following books before they choose any mutual fund.
    1. A Random Walk Down Wall steet by Burton Malkiel
    2. Common Sense on mutual funds by Jack Bogle

    The US universities (most prominently U Chicago) has had several professors who have devoted entire careers to understanding 'alpha' and their conclusion is remarkably similar - there is no proof that active fund managers add value and in the rare case that they do (think Warren Buffet) it is not possible to identify such managers in advance.

    Please do read the above mentioned books and let me know what you think.

    Reply
    1. freefincal

      And I suggest you figure what would happen to a periodically rebalanced portfolio which has adequate alpha in it. The only thing I care about is for my portfolio to beat the index. I am not interested in the fate of active mutual funds.

      Reply
  60. DoNotDisclose

    Dear Pattu,

    I suggest that you and the viewers read the following books before they choose any mutual fund.
    1. A Random Walk Down Wall steet by Burton Malkiel
    2. Common Sense on mutual funds by Jack Bogle

    The US universities (most prominently U Chicago) has had several professors who have devoted entire careers to understanding 'alpha' and their conclusion is remarkably similar - there is no proof that active fund managers add value and in the rare case that they do (think Warren Buffet) it is not possible to identify such managers in advance.

    Please do read the above mentioned books and let me know what you think.

    Reply
  61. Hema

    Hello sir,

    I am a new visitor to your informative site.

    I had heard abt the overlapping concept.

    I am planning for SIP portfolio for 3 family members. each has goals of 5 yrs, 8 yrs, 10yrs.

    one out of the 3 has an SIP amt nearly 2.5 Lac. So it looks like preferrably to avoid writing AIR(annual info return), I will have to choose 16 MFs... Now my uestion is
    (1) how to check overlapping of 15 funds ? Also
    (2) Should I check overlapping within different portfolios of the Family OR that of the person?

    Pl guide.

    It's a very informative site which I NEED to read & learn :-))
    with regards

    Reply
  62. Hema

    Hello Sir,

    as I am trying to learn reading your blog,I found some newly launched funds are "unrated"...what does that mean?

    with regards

    Reply
  63. Hema

    Hello Sir,

    as I am trying to learn reading your blog,I found some newly launched funds are "unrated"...what does that mean?

    with regards

    Reply
  64. Kishan Rana

    Hi Pattu sir,

    I have started SIP from last year in Franklin India Bluechip Fund,Quantum Long Term Equity fund
    & SBI emerging business fund with your fund selection method.Thanks a tone for this valuable selection method.

    Now I want to add max 3 more funds from each category in my portfolio.

    After using the MF selection ,standard deviation & overlapping method evaluating the various
    parameters from last couple of days,I have selected some funds .
    Below are the funds with my selection priority and overlapping % :

    Overlap %age for Large Cap:

    Selection Std FIBF QLTEF
    Order Deviation

    1 11.69 Tata Pure Equity Fund - Plan A 40 24
    2 13.76 SBI Magnum Equity Fund 44 16
    3 13.7 Axis Equity Fund 44 24
    4 13.98 UTI Equity Fund 48 20
    5 14.54 L&T Equity Fund 36 20

    Overlap %age for Mid Cap:

    Selection Std
    Order Deviation FIBF QLTEF

    1 11.65 ICICI Prudential Indo Asia Equity Fund 16 NA
    2 13.74 SBI Magnum Multiplier Plus Scheme 28 16
    3 12.75 SBI Bluechip Fund 36 20
    4 14.33 Mirae Asset India Opportunities Fund 40 24

    Overlap %age for Small Cap:

    Selection Std
    Order Deviation QLTEF SBIEBF

    1 16.5 Franklin India Smaller Companies Fund 4 8
    2 15.78 SBI Magnum Midcap Fund 4 12
    3 15.76 Mirae Asset Emerging Bluechip Fund 16 8
    4 16.05 DSP BlackRock Micro Cap Fund NA 4
    5 15.94 HDFC Mid-Cap Opportunities Fund 8 12
    6 18.38 BNP Paribas Midcap Fund 4 4

    Q1 Please suggest me if i am correct in my selection (I have preferred overlapping over Std Deviation ). Please help to add one fund from each category.

    Q2 Should I also switch from QLTEF to any other fund.
    What should be the parameters e.g. returns comparison/alpha/beta etc
    to switch from any fund?

    Thanks,
    K C Rana

    Reply
  65. Kishan Rana

    Hi Pattu sir,

    I have started SIP from last year in Franklin India Bluechip Fund,Quantum Long Term Equity fund
    & SBI emerging business fund with your fund selection method.Thanks a tone for this valuable selection method.

    Now I want to add max 3 more funds from each category in my portfolio.

    After using the MF selection ,standard deviation & overlapping method evaluating the various
    parameters from last couple of days,I have selected some funds .
    Below are the funds with my selection priority and overlapping % :

    Overlap %age for Large Cap:

    Selection Std FIBF QLTEF
    Order Deviation

    1 11.69 Tata Pure Equity Fund - Plan A 40 24
    2 13.76 SBI Magnum Equity Fund 44 16
    3 13.7 Axis Equity Fund 44 24
    4 13.98 UTI Equity Fund 48 20
    5 14.54 L&T Equity Fund 36 20

    Overlap %age for Mid Cap:

    Selection Std
    Order Deviation FIBF QLTEF

    1 11.65 ICICI Prudential Indo Asia Equity Fund 16 NA
    2 13.74 SBI Magnum Multiplier Plus Scheme 28 16
    3 12.75 SBI Bluechip Fund 36 20
    4 14.33 Mirae Asset India Opportunities Fund 40 24

    Overlap %age for Small Cap:

    Selection Std
    Order Deviation QLTEF SBIEBF

    1 16.5 Franklin India Smaller Companies Fund 4 8
    2 15.78 SBI Magnum Midcap Fund 4 12
    3 15.76 Mirae Asset Emerging Bluechip Fund 16 8
    4 16.05 DSP BlackRock Micro Cap Fund NA 4
    5 15.94 HDFC Mid-Cap Opportunities Fund 8 12
    6 18.38 BNP Paribas Midcap Fund 4 4

    Q1 Please suggest me if i am correct in my selection (I have preferred overlapping over Std Deviation ). Please help to add one fund from each category.

    Q2 Should I also switch from QLTEF to any other fund.
    What should be the parameters e.g. returns comparison/alpha/beta etc
    to switch from any fund?

    Thanks,
    K C Rana

    Reply
  66. Vikram

    While HDFC 200 has paid off really well in terms of 10-yr returns but currently all risk numbers (Std deviation, Alpha, Beta, Sharpe ratio) and Fund Risk Grade are significantly against this fund if we go by the guide. However, its still ranked #1 in 10-yr performance. Should anybody invest in HDFC 200 still because as per the guide one should stay away from this fund.

    Reply
  67. Srinivas

    Greetings Pattu Sir !!

    Thanks a ton for the superb explanation on how to decide a Equity Mutual Fund.
    I Have a small query,While going through Value Research the parameters (e.g. Alpha,Beta,Stddev,Mean ) are not mentioned for Direct Funds. Will these parameters be available in Fund Document or any other way to get these parametric values will be helpful.

    Regards,
    Srini

    Reply
  68. Pingback: how I did, selecting mutual fund for the 1st time? - Harry's Tech Space

  69. Raj Mehta

    Thanks for explaining complicated world of mutual fund step by step. It is true that investment is considered as rocket science by many of us. But after reading this article, I am confident that mutual fund investments can be a success if you do good research and follow wise advice.

    Reply
  70. Fact_Man

    My Portfolio:

    Aim: Wealth creation for a 10 years for child education
    Wealth creation for a period of 15 to 20 years for Retirement.
    Iam currently 35 years of age and have around 20k Surplus every month to be invested into Mutual Fund.

    Below is my portfolio:

    Large Cap:
    Quantum Long Term Equity fund : SIP- Rs 2000 per month - Increasing to 4000 Rs per month from this onwards

    Small / Mid Cap:
    DSP BlackRock Micro Cap fund growth - Rs 1000 SIP per month

    Diversified Fund:
    UTI MNC Fund growth:- Rs 1000 SIP Per month

    Balanced Fund:
    HDFC Balanced fund growth : Rs2000 SIP per Month
    L&T India Prudence fund growth: Rs 2000 Per Month

    Long term Debt Fund:
    HDFC High Interest fund dynamic plan (G) : Rs 1000 SIP per Month
    Reliance Dynamic bond fund growth plan (G) : Rs 1000 SIP Per month

    Short Term debt:
    Birla SUNLIFE Treasury Optimizer Plan (G) : Lumpsum Rs 5000
    ICICI Prudential Banking and PSU Debt Fund - Direct Plan(G) : Lumpsum Rs 5000

    Credit Opportunities fund:
    DSP BR Income Opportunities Fund (G): Rs 1000 SIP Per Month

    Please let me know if there is any changes needs to be made ? Are the selected funds good ?

    Reply
  71. Depeak Kumar

    This is the perfect guide that helps to understand the importance of mutual funds & their investment plans.It will deliver required amount of benefits so as to attain desired future results related to earnings. Best post i have read about selecting of a mutual funds.

    Reply
    1. freefincal

      I do hope you realize that the links in comments are "nofollow" and the only benefit of posting them is when the comment is interesting enough for other readers to click on it.

      Reply

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