Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

How to gauge risk in your MF portfolio?
Thu, 12 Jun Pre-Open

Many investors in equity markets prefer to invest through mutual funds (MFs). There are many advantages in taking the MF route. If you pick a good fund then you are saved of the trouble of analyzing individual stocks as well as the stock market. MFs can provide adequate diversification and decent long term returns. Many people view MFs as a good way to lower their overall risk when investing in equities. However, there are a few key risks that one must be aware of while choosing a good Equity MF.

If you are a long term investor in Equity MFs, you should keep factors like portfolio churn as well as the fund manager attrition risk in mind. The churn in a mutual fund portfolio is a bigger risk than many people realize. The churn as measured by the portfolio turnover ratio is higher than 100% in many popular mutual funds in India. In simple words this means that the fund manager has turned over the entire portfolio once in the last 12 months. If you are uncomfortable with such a high churn, you should consider switching to another fund.

The fund manager risk is another important aspect in mutual fund selection. If you have two funds in your portfolio managed by the same individual, you are compromising on diversification and increasing your risk. Then there are certain fund houses that witness a lot of attrition when it comes to the fund managers. If the new fund manager is not up to the job, it will affect the returns of the fund negatively. In case there is such a change in one of your MF holdings, it would be prudent to have a look at the new fund manager's track record before taking a call on your investment.

Also of concern to long term investors should be the theme of the fund. For example, if a fund manager of a dedicated large cap fund were to start investing aggressively in mid and small cap stocks, it might be a good idea to exit the fund.

We believe that long term investors should pick Equity MFs not just on their long term performance. But the above mentioned risks should also be given due consideration. In addition, investing through the Systematic Investment Plan (SIP) route will also help to lower the risk of market fluctuations. Finally do remember to consult your financial advisor before making long term investments in equity markets.

How do you pick the best mutual funds? Share your views on the .Equitymaster Club.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "How to gauge risk in your MF portfolio?". Click here!


Views on News

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

More Views on News

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps (Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Make Rs 5,000 Per Day Trading the Market (Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.

The Hidden Tesla in My Great Indian Wealth Project (Profit Hunter)

Feb 23, 2021

An Indian company founded three decades ago in a garage caught my attention...

Gold 65,000 and Silver 84,000 in 2022

Feb 26, 2021

In this episode of the Investor Hour, India's #1 trader, Vijay Bhambwani, talks to us about the stock market, his new targets for gold and silver, the best long-term investment opportunity, and a lot more.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms