Dalal Street Investment Journal - July 09, 2019

70 DALAL STREET INVESTMENT JOURNAL I JULY 8 - 21, 2019 DSIJ. in^

MF page - 04

Portfolio of Large Cap, Mid Cap and Small Cap Funds Vs Multi-cap Funds

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

6/11/2008

10/11/2008

2/11/20096/11/2009

10/11/2009

2/11/20106/11/2010

10/11/2010

2/11/20116/11/2011

10/11/2011

2/11/20126/11/2012

10/11/2012

2/11/20136/11/2013

10/11/2013

2/11/20146/11/2014

10/11/2014

2/11/20156/11/2015

10/11/2015

2/11/20166/11/2016

3 - Year Average Rolling Return

Multi Cap Funds Large Cap Funds Mid Cap Funds Small Cap Funds Sensex

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

6/11/20089/11/200812/11/20083/11/20096/11/20099/11/200912/11/20093/11/20106/11/20109/11/201012/11/20103/11/20116/11/20119/11/201112/11/20113/11/20126/11/20129/11/201212/11/20123/11/20136/11/20139/11/201312/11/20133/11/20146/11/2014

5 - Year Average Rolling Return

Multi Cap Funds Large Cap Funds Mid Cap Funds Small Cap Funds Sensex

When it comes to three-year average

rolling returns, then also the picture

does not change much and remains the

same as 1-year average rolling returns.

Here too while the market rises, the

mid-cap and small-cap funds perform

well, whereas Sensex performs poorly

when compared to other categories. But

when the market falls, the Sensex is able

to hold the downfall better than others,

followed by large-cap funds and

multi-cap funds. The mid-cap and

small-cap funds lose in the falling

market when compared to other

categories. We studied 1,972 instances

in this case.

The funds on an average have never

generated negative returns during the

five-year rolling returns in any time

frame that we studied. Here, we studied

1,480 instances. The 5-year average

rolling returns give us a better idea as to

how the different categories are

performing on a long-term basis. The

graph above clearly shows that with a

long-term perspective, mid-cap and

small-cap funds clearly win, followed

by multi-cap funds. In the long-term,

the Sensex clearly underperforms other

categories.

The above observation may suggest investing in mid-cap and small-cap funds as these are the best way to earn better returns in the

longer run. However, in the above analysis, we have not taken any risk factors into consideration. Your ability to contain risk

matters when you invest. You should take only those risks that you can digest. For this, you need to assess your risk profile.

Now we will check our original proposition whether you should invest directly in a multi-cap fund or make a portfolio of small-

cap, mid-cap and large-cap funds and manage it. To illustrate this, we constructed an equally weighted portfolio of large-cap,

mid-cap and small-cap funds and compared it with multi-cap funds. Once again, we divided our analysis into three time frames,

that is, one-year, three-year and five-year. For every period, we took rolling returns of the funds.

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