Mutual Funds Cheat Sheet

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Portfolio Summary:

Source: Value Research

With an annual compounded return of 18.8%, the initial investment of rupees Rs 10 lakh becomes Rs 59.2 lakh after 10 years (5.9 times).

Note: Past performance is no guarantee of future results.

Fund Performance:

I look at the fund performance for at least 10 years. Mirae Asset Large Cap Fund has outperformed the BSE index over the last 10 years.

Source: Value Research

Returns (%): I look at the returns over the 3-Year, 5-Year, and 10-Year period. Mirae Asset Large Cap Fund has underperformed the BSE index in 3-Years and outperformed the BSE index over 5-Y and 10-Years.

Source: Value Research

SIP vs. Lumpsum: Funds NAV performance mimics the BSE index. As a value investor, I like to buy things cheap and prefer lumpsum investment. I aim to invest more when the NAV is down 5% or more. For example, NAV was down 20% in Mar 2020, I would have invested the amount that I have planned to invest for the whole year. If you don’t have time to keep track of the market, then you may choose SIP.

Source: Value Research

Asset Allocation:

Return Expectations:
Buffett Formula:

Fund total returns = GDP growth (6%) + inflation (4%) + dividend yield (2%)

I would have a realistic expectation of an additional 5-6% above the fixed deposit (FD) rates. For example, currently, FD rates are 5-6%, I would expect 11-12% per annum from mutual funds.

I seek to invest in funds that have five-star or four-star ratings. I keep track of the fund manager, performance and ratings every year. If the ratings go to three-star or below, I switch to other funds with five-star or four-star ratings.

Expense Ratio:
I seek to invest in funds that have a relatively low expense ratio within the fund category. You can earn 1.5% more via direct investment plans (no commission paid to brokers).

Risk Grade:
I seek to invest in funds that take fewer risks to generate good returns. I avoid funds that invest in low-quality business.

I seek to invest in funds with low turnover. The percentage of fund’s portfolio that is churned in the last one year. Lower the better.

Fund Manager:
I only invest in funds managed by good fund managers/investors. I look at the track record of the fund managers for at least 11 years to distinguish skill from luck. For example, Chandresh Nigam and Rajeev Thakkar are good fund managers.

Value Investor Rajeev Thakkar:

Value Investing with Chandresh Nigam:

For educational purposes only.


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