PrimeInvestor - Articles and Reports

Some of you wish to invest in index funds and want to know the best index funds. Others want to hold a portfolio of index funds. Building a portfolio out of index funds or adding index funds calls for mixing strategies and market-cap segments. In this article, we’ll try to explain the key characteristics of some of the equity indices and how they can be paired with other index funds/ETFs or with active funds.

When it comes to mutual fund returns, two things are true for most mutual fund investors:

It is the most important thing for them
It is among the least understood set of concepts

An advisor may talk about all the nuances of mutual fund investments to an investor – risk mitigation, balancing, diversification, down-side protection etc – but at the end of the day, the person would only care about how much he/she would end up making.

And yet, when it comes to reading and understanding returns, they could make elementary mistakes. For example, once when I recommended an investor invest in a scheme for 5 years for optimal benefit, he said he would invest in it for a year, because “the fund has better 1-year return than 5-year return” – obviously going by the most recent numbers.

The mechanism of expense ratios in mutual funds is a befuddling topic for many investors. Over the years, questions associated with expense ratios have been among the most frequent that I have answered.

This essay is an attempt to answer questions on this topic in a patient and clear manner. But before we find out how it works, let’s understand a bit of what it is.

What are the best ELSS funds?
There’s a lot of research work that needs to be done when finding the best ELSS fund. You need to look at factors such as:
Consistency in performance against peer group and benchmark
Volatility in performance
Ability to contain downsides in a correction and ability to deliver in bull markets.
Investment strategy across market cap
Expense Ratio (the lower, the better)

“Can I invest in hybrid funds” is a question that we often get. Ranging from the aggressive equity-oriented funds to arbitrage funds, the broad term is ‘hybrid’. We have already discussed some of the key categories of hybrid funds in our earlier articles.
However, this one will cover all of them in a single essay and let you know when and whether you need them.