What is a Diversified Equity mutual fund? What are the best 3 such MFs available in India?

Question

What is a Diversified Equity mutual fund? What are the best 3 such MFs available in India?

Answer 1

Diversification : According to finance theory, when your investments are spread across several securities, your risk reduces substantially. A mutual fund is able to diversify more easily than an average investor across several companies, which an ordinary investor may not be able to do. With an investment of Rs 5000, you can buy stocks in some of the top Indian companies through a mutual fund, which may not be possible to do as an individual investor.

Top Funds Rank : Yr Return %

1 DWS Investment Opportunity :  23.8

2 IDFC Premier Equity :  18.8

3 ICICI Pru Infra Inst I :  18.5

4 Reliance Regular Savings Equity : 18.3

5 BoB Growth : 17.7

6 ICICI Pru Infra : 17.5

7 Magnum COMMA : 17.4

8 Sund. BNP Par. Select Focus Reg : 14.6

9 Escorts Growth : 14.5

10 DWS Alpha Equity : 13.9

Answer 2

Sandip,

A diversified mutual fund invest money on Large cap, mid cap and small cap companies. Not only this, but, they will invest money on the stocks on various industries in each cap to diversify the risk.

The best known diversified equity funds today is:

DSP Merryl Lynch Equity

SBI Magnum Contra

Kotak Opportunities

As an additional,

DSP Merry Lynch Opportunities too...

Does this make sense?

Answer 3

Your question is related to Diversified Equity Funds and identifying the best in that category. Diversified Equity funds are those that spread their investments across sectors e.g IT, Pharma, Banking, Oil & Gas, Real estate, Telecom, FMCG,etc. So they are not restricted to one specific sector. They diversify their allocations across sectors and thus minimise the risk of over-concentration in any one particular sector. Over the long term, diversified equity funds have had the best track records.

I have given some specifics on Fund choices below, but before that I am purposely trying give you a broader understanding of how to go about - making your money work best for you:-)

There is nothing like starting early, in your investing life and use the power of compounding to your advantage. To understand power of compounding, consider this excellent article at http://www.valueresearchonline.com/story...

Next, you can invest in a mix of the following strategies, depending on your investing risk profile, as indicated below. Invest only those funds that you do not need. Use these funds to invest wisely. You need to remain invested for the long term, since you want capital growth.

Conservative Risk Profile (you seem to be of this type; someone who wants his principle to be secure and is looking for a decent growth over the long term)

1. PPF (Public Provident Fund) - account can be opened with any State Bank of India branch. This gives you a compounded 8% return per year, is currently tax free, and is the safest instrument available. Invest 50% of sparable funds in that

2. A Balance fund like HDFC Prudence Fund - This Mutual Fund invests in both equity (65%) and debt (35%) instruments. This is one of the safest funds with a great track record of over 14 years, and has been giving a compounding return of around 20-25% per year. This fund has one important virtue: it manages to lose less than the category average in periods of downside. Couple this with its tendency to top charts & you get a safe & sure fund in HDFC Prudence. Invest 30% of the funds in HDPC Prudence.

check out HDFC Prudence fund analysis at

http://www.valueresearchonline.com/funds...

3. Equity Diversified MF -like SBI Magnum Contra, Reliance Growth, DSPML Equity

These are funds having a very good long term record in delivering great returns with low to average risk. They have figured among the top fund ratings for a very long time. Invest the balance 20% in funds like these

Check out more on the top rated funds at http://www.valueresearchonline.com/topra...

Moderate Risk Profile (someone who can take a little more risk with some of his money)

PPF -40%; HDFC Prudence -30%; SBI Contra or Reliance Growth fund -30%

Aggressive Risk Profile (someone who can take higher risks with some of his money)

PPF-20%; HDFC Prudence -30%; SBI Contra or Reliance Growth - 50%