Trust you are doing great..!
The Beginning of 2020 is not as good as we thought. Coronavirus stopped the world. Every morning we get new bad news about deaths,new cases and some rumors etc..but “This too shall pass”.
India Stock markets corrected almost 40% in a month.So what should Existing investors and new investors do ? It’s the best time to start the investment and if you are already doing then it’s time to deploy a new fund. The reason is that in stock markets buying low and selling high works well.
We have seen in my previous article about factors that we need to analyze while selecting the Mutual funds. Please find the link : https://capitalgain19.wordpress.com/2020/04/19/stock-market-money-making-machine/
So Let’s analyze one fund here, so you will get an overall idea about the analysis of Mutual funds.
We are going to analyse Parag Parikh long term Equity fund. It belongs to Parag Parikh Mutual fund. Founder of the fund is Late Mr. Parag Parikh sir. He is also the author of many investing books. Value investing and behavioral finance is one of my favourite investing books.
PPFAS(Parag Parikh financial advisory service) has only three funds which shows that they are very focused in their investing.
Let’s look into some details:
|Fund Category||Multi cap|
|Benchmark||NIFTY 500 TRI|
|No. of Stocks in Portfolio||20 Indian / 5 Foreign Securities|
|Exit Load||2% if redeemed within 365 days. 1% within 366 to 730 days.|
The above measures are important to select any mutual fund.
Let’s look at each in brief.
Fund Manager : It’s the most important factor to consider for selecting the mutual fund. Fund manager is the heart of the fund. This fund is managed by three fund manager but CIO is Mr. Rajeev thakkar. He has been associated with PPFAS since 2001.Mr. Thakkar is a CA,CFA,CFP and Cost Accountant. Mr. Thakkar is influenced by Warren buffet and Charlie munger. There are several videos on youtube of Mr. Thakkar on various topics.You can watch, good learnings.
Portfolio: PPLTEF has a unique portfolio of Indian and Overseas securities. They allocated 65.93% of funds in Indian Securities, 24.95% in Overseas securities and 6.24% in ADR/GDR and rest are as cash reserves.
To invest in overseas securities is quite unique and will give your portfolio a stability and global exposure. Companies like Alphabet,facebook are not in India and have great potential in the future. So to invest in the opportunity like this, they have international exposure.
Let’s look into the portfolio.
So here ITC,Oracle fin serv,MCX are new additions.
Portfolio has a 67% exposure to the top 3 sectors. Top 3 sectors consist of Financial,Technology and Automobile which are really good sectors for the future.
Expense ratio : Expense ratio is 1.95% which is inline with the peers.
Returns of Fund within Category:
|Fund Name||Returns since launch||5 Year CAGR|
|Parag Parikh Long Term Fund||13.83%||7.03%|
|Axis multi cap fund||13.23%||4.25%|
|SBI Multicap fund||10.08%||4.05%|
|ICICI Pru Multi cap||13.03%||2.75 %|
Risks : This is an important factor to consider while selecting funds. It includes some ratios by which you can understand the risk among peers. Let’s look into One by One.
- Turn-over ratio :The turnover ratio or turnover rate is the percentage of a mutual fund or other portfolio’s holdings that have been replaced in a given year (calendar year or whatever 12-month period represents the fund’s fiscal year). PPFAS has a turnover ratio very low around 5.82% among the peers. (Peers have a ratio of 20 to 55%). It shows that they are very focused on their investment. It’s really a good sign of any fund.
- Sharpe ratio : The Sharpe ratio was developed by Nobel laureate William sharpe and is used to help investors understand the return of an investment compared to its risk. The ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk.The greater a portfolio’s Sharpe ratio, the better its risk-adjusted-performance. PPFAS has a sharpe ratio of -0.13 which is higher among peers. (Peers have a sharpe ratio of -0.53 to -0.40).
- Sortino Ratio : The Sortino ratio measures the risk-adjusted return of an investment asset, portfolio, or strategy. It is a modification of the Sharpe ratio but penalizes only those returns falling below a user-specified target or required rate of return, while the Sharpe ratio penalizes both upside and downside volatility equally. Higher the Sortino ratio is good among the peers. PPFAS has a sortino ratio of -0.10 where peers has around -0.40 to 0.47.
So by all the parameters PPFAS is beating all funds among the peers.
Exit Load : Exit load is 2% if redeemed within 365 days. 1% within 366 to 730 days. This exit load is higher among the peers. They stated that reason behind the higher charges is investor remain invested for long term.
Here the analysis of Parag parikh long term equity fund. Fund is beating almost all parameters compared with the peers.
Due to corona crisis,we have an excellent opportunity to invest in Stock Market. Don’t let go this once in a decade opportunity.
Consult good financial advisor and invest for your future goals.
Source : Parag Parikh Website, Value research online.
Disclosure : I am not a SEBI registered analyst. Please consult advisor before take any action.