Choosing a fund?? Why not Multicaps!!

When people think of investing in an equity mutual fund, the most commonly asked question by them is which is the best fund to invest. Actually the first question should be which category is most appropriate to choose the fund from – whether it should be large cap, midcap, small cap, multicap, or sectoral fund category. Each such category has its own advantages - while large-cap funds can ensure stability in the portfolio, midcap and small cap funds can potentially provide exceptionally high returns, sectoral funds can provide a kicker to the returns if the going is good for the sector.

 Nevertheless among all these categories the one that stands out due to its considerable flexibility to invest anywhere is multicap category. Multicap funds are diversified mutual funds that can invest in companies across market capitalization. In other words, they are market capitalization agnostic and invest across the breadth of the equity market. Thus multicap funds are able to take advantage of the opportunities across market cap for the investment. The funds in other categories have restricted mandate and are constrained to stick to the companies that are defined by their defined market capitalization segment. For example a large cap fund will not be able to invest into mid and small cap stocks even if the valuations in these market cap segments become very compelling. Similarly a midcap fund is forced to remain invested in mid and small cap stocks even during severe bearish markets when shares of mid and small cap companies usually have a free fall.

In such a scenario a multicap fund having an astute fund manager can easily contain the downside by realigning market cap allocation as per the market situations. In a robust economic environment, the fund manager of a multicap fund can increase his bets on mid and small sized companies to benefit from earnings upgrades. And he moves his money from shares of mid cap companies to large cap companies to take a shelter, if he is expects prolonged bearish periods. Also a multicap fund is able to take advantage of both growth and value style of investment as their investment universe is very large.

Therefore in the long run multicap funds are usually better wealth creators than other categories as they can take advantage of investment opportunities across market caps. This fact is also supported by analysing the long term performance data of all categories. As per mutual fund performance data available as on 29 July, 2015 the large cap category has provided a return of 14.93% and 15.19% respectively during the past 10 year and 15 year periods, midcap category has provided a return of 18.05% and 19.32% respectively and multicap category has provided a return of 16.37% and 20.24% respectively over the same periods. Thus returns from multicap category are comparable to midcap category over the long term but come with lesser volatility. When compared with large cap category it has clearly beaten them during both 10 year and 15 year periods.

After asset allocation at broad level of debt-vs-equity, the second level of asset allocation that an equity portion of the portfolio requires is at the market capitalization level. But an average investor finds it difficult to assess which segment of the market will outperform – will it be large cap or midcap or small cap. Thus by investing in a good multicap fund they can benefit in any market condition as market capitalization decisions are taken care of by the fund manager who has necessary skills-set. But it is noteworthy that since a multicap fund has a much larger universe to invest, therefore risk levels of a multicap fund can quickly change. Thus the capability of the fund manager becomes a crucial thing for the success of a multicap fund. The fund manager should be able to read market conditions correctly and change the portfolio allocation of the fund as and when required.

            Therefore while selecting a multicap fund you should carefully check the past track records of both the fund and its fund manager. In short, it is beneficial for the retail investors that they select multicap funds as their core holding and do not get carried away by themes and mid-small-large cap schemes. It is especially useful for those investors who do not understand asset allocation and do not have a large portfolio.

Gain Analysis, 9 months holding...

SCRIP	PURCHASE PRICE	PRICE as on 17 July 2015	GAIN	%AGE gain
ENTERTAINMENT NETWORK	410	719.00	309	75
EVEREADY IND	110	366.55	256.55	233
CENTURY PLYBOARDS	183	193.00	10	5
GRANULES	76	98.05	22.05	29
LLOYD ELECTRIC	180	232.10	52.1	29
NUCLEUS SOFTWARE	223	317.00	94	42
R S SOFTWARE	283	162.80	-120.2	-42
SUVEN LIFE SCIENCES	122	268.05	146.05	120
T V TODAY NETWORK	170	205.95	35.95	21
CHOLAMANDALAM FINANCE	610	693.35	83.35	14
ZICOM SECURITY	173	162.25	-10.75	-6
BAJAJ FINSERVE	1450	1719.85	269.85	19
overall gain	IN ONLY 274 DAYS			44.88%

Investment stress???, ways to tackle it....

Oh, yes! Investment-related stress is as real as any other kind of stress. And probably just like physical stress or emotional stress, it creeps into you unnoticed. But stress, of any kind, is never as innocuous as it seems.
What investment-related stress does is that it makes you take financial decisions injudiciously. It makes you take knee jerk reactions that might seem sound at that time, but would be detrimental to your overall investments.So, yes, investment-related stress is real. That's the bad news. The good news is that there are real ways to beat this stress as well.
Clear out the junk
Many investors believe that they need a large number of funds to build a diversified portfolio. This is not true. You can get adequate diversification even with a few number of funds. Different strategies, different fund managers, different exposures, is all you need and what you can get without piling on fund after fund. So, clear the junk and build a portfolio that's easier to manage and track.
Keep a scrapbook
Maybe not exactly a scrapbook, but at least an account statement of your investments. Very often, we come across cases where investors know they've put their money in something, but have no idea about what that something is. That is a situation everyone needs to eschew. Keep a record of your investments as well as your insurance policies, and keep them handy so you don't waste time searching for them when you need them.
Take a walk
Literally, take a walk. When you look at the markets falling and think about redeeming your long-term fund investments, take a walk. When you see the markets rising and think about betting on a particular stock a friend tipped you about, take a walk. Basically, take a walk before you jump into any investment decision. A walk will clear your head and you'll make sure you don't end up with a regrettable decision.
Eat small meals often
Meals, here, means SIPs. The best way to invest in mutual funds is by putting in a small amount regularly, rather than a big amount in one go. Systematic investment plans have proven to be extremely rewarding in the long run because they average out your investment cause and allow you to buy units across various market conditions. And over and above that, SIPs become a habit that's worth holding onto.

Dont you invest, trade or spend on borrowed capital " THE GREEK WAY"

The rise of social media has meant that even somewhat esoteric jokes about financial events get passed around. During the global financial crisis, someone sent me this one: 1st guy: 'The financial crisis is making me really pessimistic. I'm starting to buy gold'. Second guy: 'That makes you an optimist. I'm buying rice.' Obviously, the Greece crisis has led to a flood of jokes. There's the one about the difference between 'Going Dutch' to share a restaurant bill and 'Going Greek' to not pay the bill at all. And there are any number about the Greek government eagerly awaiting replies to the Nigerian emails that they have responded to.



These Greek jokes are funny because they transfer the problems being faced by a country's economy to those of an individual or a business. However, in much the same way, Greece's problems are also a lesson in personal or corporate finance. At its simplest, Greece is an example of living beyond one's means, of spending like a much richer person than you are. In Greece's case, much of that amounted to the usual socialist folly of a bloated, overpaid and underperforming state sector.

However, what makes it relevant to individuals and businesses is the enormous role played by lenders who lent to Greece while winking at the Greek government's fudging of revenue and deficit figures. In India, we find no shortage of people and companies who have borrowed far beyond their means, simply because they could do so. Making big plans and spending money feels good and in all that excitement, it's easy to forget all the repayment and whether the borrowing is adding any real value to your future.

Borrowing for consumption is seen as completely normal--even desirable behaviour today. And yet, almost by definition, it implies zero savings, and nothing damages people's future more than that.

Portfolio Readjustment dated 3 July 2015

I have exited Fedders Lloyd and Infinite Computer solutions on 3 July. The funds have been utilized for purchasing Century Plyboards & Cholamandalam Investment.

New Multibagger purchases on 29 June 2015

We have added Century Plyboards and Cholamandlam Investment & Finance co at 183 & 623 respectively on 29th June 2015