Fund of Fortnight
This is our mutual fund recommendation. Every fortnight , we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same
Reason for recommendation
“The markets can remain irrational longer than you can remain solvent.” These are the famous words of economist John Maynard Keynes and they aptly highlight the current status of the equity market. Despite all the concerns about stretched valuations, the market has been touching new highs. In such a scenario, investing in equity becomes tricky. You neither want to lose on the potential gain nor do you want to be caught on the wrong side of the market. Large-cap and mid-cap are the categories that will give investors best of both the worlds, i.e. better returns with lower downside.
The large-cap component of funds helps restrict the downside risk and exposure to mid-cap will help to capture the gains in the market. One of the best funds from this category is DSP Equity Opportunities Fund. This fund has generated three-year average rolling return of 14.58 per cent compared to 13.51 per cent by its benchmark. Even if we extend our study to five years, the rolling returns of the fund increases to 14.88 per cent. The fund has also performed well in terms of risk measured through maximum drawdown, which is 34 per cent for the fund compared to more than 50 per cent for its bench-mark.
When compared to its peers the fund is on par with the best in the category and has generated annualised return of 17.9 per cent in the last three years. The fund is well-diversified with 60 stocks and the top 10 constitute only 42.72 per cent of its portfolio. In terms of market capitalisation, 56 per cent of the portfolio is constituted by large-cap stocks, around 40 per cent by mid-cap stocks and the rest by small-cap stocks. The portfolio of the fund is a bit unconventional as the fund is underweight on IT and pharmaceuticals and overweight on financials. The fund is suitable for aggressive investors with an investment horizon of more than three years.
