With the markets falling 2.32% over the last four sessions, certain investors may feel concerned about their investment in funds in the mid and small-cap segment.
According to Amit Kukreja, founder of AmitKukreja.com, this is not the right time to exit the mid-cap funds, as there were several factors that resulted in the underperformance of many of them.
"There are many reasons, which have triggered the underperformance of the mid-cap funds with respect to the index, but that doesn't mean it ends at all here. There are many other opportunities, which have come early and there is also a horizon that needs to be kept in mind. If we have to conclude that this is (the) time to exit (an) actively managed mid-cap fund, then that is not the case. One year is too short a frame to judge it," Kukreja told NDTV Profit.
According to him, the PSU rally and major allocation towards large caps are a few of the reasons for the underperformance.
While there have been several underperforming funds, Motilal Oswal's mid-cap fund managed by Niket Shah was an exception. Identification of the right stocks with high growth, no compromising in quality and buying at the right valuation were few of the reasons for the fund's success, said the fund manager at Motilal Oswal AMC.
Shah further said that it is important to identify the right theme ahead of the cycle and have a three to five-year view. While the market may not appreciate or resonate with the theme, it would pick up eventually, he said.
Query 1: I am new to mutual funds and made Rs 10-12 lakh last year through stocks. Now I am looking to invest the gains in mutual funds for the next four to five years. What funds can you recommend?
Name: Shankar | Age: 49 years
Amit Kukreja: Two things I would call out. Shankar should have gone with mutual funds first, then with stocks. Investment is led by strategy. So, (he) should do a diversified strategy first, then stocks.
But anyway, he has already done the investment and he is talking about only investing the gains. I would rather say, go on full with investments in mutual funds, pick up flexi-cap and multi-cap.
We just spoke about the underperformance of the mid caps and small caps, with respect to the index. We need to make sure that the more flexi-cap and multi-cap categories we have in our portfolio, the easier it becomes for us to have a decent double-digit return in the mutual fund portfolio.
So, pick up for example, UTI Nifty 200 Momentum 30 Index Fund, (it has) fantastic performance. You can pick up Parag Parikh Flexi Cap, you can pick up Quant Mid Cap Fund. So, these are some of the funds he can add to his portfolio.
Query 2: I have an SIP of Rs 50,000 in Parag Parikh Flexi Cap Fund and Rs 25,000 in Nippon Small Cap Fund. Additionally, I want to invest Rs 2.5 crore and retire in the next two years, with a regular source of income. So, should I invest as an SIP or in a lump sum? Can you recommend me a few funds?
Name: Rajat Mishra | Age: 56 years
Amit Kukreja: Two or three words of caution. I hope he has done a detailed financial planning exercise with somebody who has given him the right asset allocation strategy, given his age.
Second, he is thinking in terms of a monthly lump sum. I think, monthly or putting a lump sum in a liquid fund and then doing a systematic transfer plan for a period of two years would be a better approach than doing a lump sum in equity.
He needs to make sure he has a decent fixed income allocation before he moves into equity. Obviously, asset allocation, a good fixed income portfolio, a stretched out systematic investing calendar from liquid to equity through lump sum investments in liquid would be the right approach.
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