Saturday, February 5, 2011

Chapter 5 - How to find best Mutual fund in India!!

You don't have to be very intelligent and geek to find out best mutual fund in Indian Mutual fund industry.
I can tell you here in one line.
But then whats the fun in investing , no research , no finding of Gem among .

I am going to tell you the mutual which is giving best returns  from last 10 years and will be remain best for next 100 years .

Now guess friends ..

ummmm is it HDFC Equity (G )  ??? no it is one of the finest we have but not the best.  Here G means Growth option. I   will NEVER ... NEVER recommend a Dividend option Mutual fund in my posts.

ok another Guess is it IDFC Premier Equity A (G) .. Noops It is another very good fund but not the best.

Reliance growth (G)  not at all .. ok leave it for now and lets discuss what are the attribute of a good mutual fund.

1. Consistent good returns year after year. (Not quarterly monthly best return)

2. Fund size should be at least INR 2000 Million (200 Crores) + but not more than 5000 crores.

    Why not more than 5000 crore +?
You can easily keep safe amount of 5000-10000 while traveling but if you have 2 Crores in cash  then ???
Bigger the amount is always more difficult to manage . Same applicable to Mutual fund size . It need best discipline and practice to growth the larger amounts. Best example is Reliance Growth Mutual fund (7000 Crore ) now it has started shaking with loads of money. Its return are still good compare to other but now difficult to match with previous returns .

on the contrary HDFC Equity (G ) is similar in size and still it is able to maintain the returns of previous history.

3. At least 3 Years old with good returns.
4. Do not touch New Fund Offers  , do you remember SBI one India and SBI Blue chip NFOs.
5. How many Units of mutual fund you get doesn't matter. 
6. Don't get tempt to buy MFs with lower NAV.   


7. Repeat above three points with me  times.
    Why ? 
    Say we have 20000 Rupees to invest .
    There is MF A which is giving 10% yearly returns  (NAV of A is 10 Rupees)
    Three is another MF B which is giving 20% yearly returns (NAV of B is 1000 Rupees)
    Lets invest 10000 in both mutual funds
    Units allocation for A :   10000/10  = 1000 Units  :)  wow so many units!!
    Unit allocation for B : 10000 /1000 = 10 Units      :(   so less . oops

    After 5 years (Assuming both funds gives their previous returns)
    Current NAV value of  A : 16 Rupees 
    Current  NAV value of f B : 2488 Rupees
  
    Value of investment  for A :  16 *1000 = 16000 Rupess
    Value of investment for B : 2488*10  =   24880 Rupees

    You can see that fund with better returns is important , NAV value is not important.

so let me disclose the best mutual fund we have , it is Reliance Banking Mutual fund (G)


Why is it best mutual fund ??? find it out yourself using various websites who provide details of mutual funds.

Hint : Compare its returns for 2001 -2011 with other best mutual funds.
Compare its recent performance (last three years) with other best mutual funds. 

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