Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now

You can switch off notifications anytime using browser settings.


Select Portfolio and Asset Combination for Display on Market Band
Select Portfolio
Select Asset Class
Show More

Get ET Markets in your own language





  • ENG - English
  • HIN - हिन्दी
  • GUJ - ગુજરાતી
  • MAR - मराठी
  • BEN - বাংলা
  • KAN - ಕನ್ನಡ
  • ORI - ଓଡିଆ
  • TEL - తెలుగు
  • TAM - தமிழ்
Drag according to your convenience

Best mutual funds to invest in 2018

ET Online|
Updated: Sep 06, 2018, 10.54 AM IST
It is the first week of the month (September), and we are back with an update on our equity mutual fund SIP portfolio recommendations. Here is the happy news: there are no changes in the portfolios in September.

A welcome change considering the changes in the last two months. These changes were mainly because of the re-categorisation of mutual fund schemes. As mandated by the Securities and Exchange Board of India, mutual fund houses have re-classified, merged, and changed attributes of some schemes.

Below are the schemes that got out of our list earlier, the new ones that replaced them, and the rationale behind the changes:

In the conservative and moderate portfolios, HDFC Hybrid Equity Fund was replaced with ICICI Prudential Regular Savings Fund and UTI Regular Savings Fund. Both these funds are among toppers in the conservative hybrid category.

We believe these conservative debt schemes, with a portfolio skewed towards debt, are more suited for conservative and moderate investors than HDFC Hybrid Equity Fund, which is an equity-oriented aggressive hybrid fund after the new categorisation. Also, we are using UTI Regular Savings Fund to avoid the concentration risk in some portfolios, as they already have a scheme of ICICI Prudential Mutual Fund.

HDFC Hybrid Equity Fund is borne out of the merger of HDFC Balanced Fund and HDFC Premier Multicap Fund. While the intrinsic attributes of HDFC Balanced Fund are contained in the new fund, it is a complete departure in the case of HDFC Premier Multicap Fund. It is not a simply vanilla rechristening of the fund. The new scheme does not have sufficient track record too so as to warrant any meaningful analysis.

In the aggressive SIP portfolios, HDFC Hybrid Equity Fund was replaced with ICICI Prudential Equity and Debt Fund for similar reasons. ICICI Prudential Equity and Debt Fund is among the toppers in the aggressive hybrid category.

We also replaced L&T India Value Fund with TATA Equity P/E Fund. The Tata scheme is among the best funds in the equity: value-oriented category. L&T India Value Fund has been excluded from the list as its ranking has dwindled.

As said earlier, we made some changes to the portfolios, again because of the re-categorisation exercise, in June. We had to remove Mirae Asset India Equity fund from our recommendation list after it was re-categorised as a multicap fund. We replaced it with ICICI Prudential Bluechip Fund to align the portfolio with our pre-defined category allocation.

Kotak Select Focus Fund was also out of the portfolio as the intrinsic style of the fund has changed. The erstwhile largecap fund has become a multicap scheme after its re-categorisation. The scheme is also renamed Kotak Standard Multicap Fund. We are replacing the scheme with SBI Bluechip Fund, a largecap scheme.

We also replaced SBI Magnum Multicap Fund with Motilal Oswal Multicap 35 Fund in some SIP portfolios to reduce the portfolio concentration in SBI Mutual Fund. Mutual Funds launched its recommended equity mutual fund portfolios to invest through SIPs in October 2016. Since then, we have been closely monitoring the schemes in the portfolios and coming out with an update in the first week of every month.

Our reason to launch these portfolios was simple. We know that many investors find it very difficult to stitch together a few schemes (or create a mutual fund portfolio, in technical parlance) that would help them to meet their various long-term financial goals. This is especially true for new investors flocking to mutual funds after the demonetisation.

Creating a mutual fund portfolio indeed involves several complicated steps. To begin with, an investor should shortlist a few schemes with a consistent long-term performance record. Then s/he should pick the ones that are in line with their risk profile and investment objectives. Then the biggest problem: how to fix the composition of the portfolio. The task doesn’t end here. They also need to monitor and review the performance of the portfolio regularly and take remedial steps if needed.

That is where Mutual Funds enters in the picture. We have created equity mutual fund SIP portfolios for three different individual risk profiles: conservative, moderate and aggressive. We have also considered three SIP baskets – between Rs 2,000-5,000, between Rs 5,000-10,000 and above Rs 10,000 – while creating these portfolios. These are the schemes that made it into our recommendation:




Note, we have assumed that the investor is investing with an investment horizon of at least five years.

Methodology Mutual Funds has employed the following parameters for shortlisting the mutual fund schemes.
1. Mean rolling returns: rolled daily for the last three years.
2. Consistency in the last three years: The three-year period is divided into smaller time periods each with a progressing weighting.
3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this. X =Returns below zero Y = Sum of all squares of X Z = Y/number of days taken for computing the ratio Downside risk = Square root of Z
4. Outperformance: It is measured by Jensen's Alpha for the last three years. Jensen's Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.
Average returns generated by the MF Scheme - [Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free Rate}
5. Asset size: For equity diversified funds, the threshold asset size is Rs 100 crore, and Rs 50 crore for balanced funds.
We have also conducted a back testing of our model portfolios. These returns are forward returns from the base date.

(Disclaimer: past performance is no guarantee for future performance.)

Also Read

How to redeem mutual fund

DSP BlackRock Mutual Fund becomes DSP Mutual Fund

DSP BlackRock Mutual Fund becomes DSP Mutual Fund

How to redeem your mutual funds

How to redeem your mutual funds

Add Your Comments
Commenting feature is disabled in your country/region.

Please wait...