The best mutual funds focused on investing in August 2024

Many mutual fund investors believe that a concentrated portfolio would help them earn better returns. They believe that many mutual fund schemes offer average returns because they have an extremely large diversified portfolio. Such investors may consider investing in focused mutual fund schemes.

As per SEBI norms, focused equity mutual funds are required to invest in a portfolio of a maximum of 30 stocks. These funds have no other restrictions when it comes to investment – ​​like flexible cap funds, they can invest in any market capitalisation and sector. If such an investment strategy appeals to you, you can learn more about focused equity mutual funds.

Read also | NPS plans outperformed over 200 mutual funds in the last one year. Should you switch sides?

As you can see, these schemes have a concentrated portfolio. That means the fund manager will pick stocks based on his convictions and take significant exposure to them. These investments can yield huge profits if the bet goes well. However, if some bets go wrong, the scheme will suffer greatly. This is the problem with concentrated bets.

Similarly, if the manager can identify sectors and market capitalizations that are ahead of the market, the plan will benefit greatly. If the decision goes wrong, the plan will suffer greatly. Again, this is the danger of having a concentrated portfolio. You will either gain a lot or lose a lot, depending on your stock-picking skills.

If you are willing to take more risks and have an investment horizon of around seven years, you can invest in these schemes. Below are our recommended equity mutual fund schemes. Follow our monthly updates to track your investments. SBI Focused Equity Fund was in the third quartile for five months. Sundaram Focused Fund has been in the third quartile for five months. The scheme had been in the second quartile for four months prior.Read also | Sector and thematic investment funds recorded the largest portfolio additions in July

The best equity-focused mutual funds to invest in in August 2024

Methodology:
ETMutualFunds.com has used the following parameters to select the equity mutual fund schemes.
1. Moving average returns: Filmed daily for the past three years.

2. Consistency over the last three years: The Hurst exponent, H, is used to calculate the consistency of a fund. The exponent H is a measure of the randomness of a fund’s NAV series. Funds with a high H tend to exhibit low volatility compared to funds. The exponent H is a measure of the randomness of a fund’s NAV series. Funds with a high H tend to exhibit low volatility compared to funds with a low H.

i) When H = 0.5, the return series is said to be a geometric Brownian time series. This type of time series is difficult to forecast.

ii) When H is less than 0.5, the series is said to be mean-reverted.

iii) When H is greater than 0.5, the series is said to be persistent. The higher the value of H, the stronger the trend of the series.

3. Downside risk: For this measure we have only considered the negative returns contributed by the mutual fund.
X = Returns below zero

Y = Sum of all squares of X

Z = Y/number of days needed to calculate the relationship

Downside risk = square root of Z

4. Superior performance: It is measured by Jensen’s Alpha for the past three years. Jensen’s Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). A higher Alpha indicates that the portfolio’s performance has outperformed the returns predicted by the market.

Average returns generated by the MF Plan =

[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}[Tasalibrederiesgo+BetadelesquemaMF*{(Rendimientopromediodelíndice-Tasalibrederiesgo}[RiskFreeRate+BetaoftheMFScheme*{(Averagereturnoftheindex-RiskFreeRate}

5. Asset size: For equity funds, the asset size limit is Rs 50 crore.

(Disclaimer: Past performance is no guarantee of future performance.)