Dalal Street Investment Journal - July 09, 2019

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

MF page - 06

DS

Investing for 5-year period

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

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

Multi Cap Vs Equal Weighted Large Cap, Mid Cap and Small Cap Portfolio Vs Sensex 5-Ye a r

Rolling Returns

Multi Cap Fund Potfolio (LC + MC + SC) Sensex

When it comes to the long-term

perspective, 5-year rolling returns

give a better picture. If we look at

the above graph, we can say that

over the long-term, equally

weighted portfolio performs way

better than the multi-cap fund and

Sensex. This shows that holding an

equal weighted portfolio of

large-cap, mid-cap and small-cap

funds proves to be a better option

than investing in multi-cap funds.

5-Year Rolling Returns

Mutual Fund Category Underperformed Outperformed Total

Multi Cap Vs Portfolio 1,381 99 1,480

Multi Cap Vs Sensex 0 1,480 1,480

In the case of 5-year rolling returns, the equally weighted portfolio of large-cap, mid-cap and small-cap was able to beat the

performance of multi-cap funds in more than 90% of the instances. It outperformed the multi-cap funds 1381 times out of a total

1,480 instances, which makes the portfolio a clear winner. However, multi-cap funds were able to outperform Sensex in all

instances.

The portfolio of large-cap, mid-cap and small-cap seems to be doing better than that of multi-cap funds and the Sensex. Needless

to say that the multi-cap funds, portfolio and Sensex did not have any negative observations in the 5-year rolling returns.

Conclusion

So, looking at the above analysis, should you go for

constructing your own multi-cap fund portfolio by investing

equally in large-cap, mid-cap and small-cap funds? From the

above study, we can clearly see that a portfolio of large-cap,

mid-cap and small-cap funds performs much better than a

multi-cap fund during most of the period. If we take the

consolidated view (one-year, three-year and five-year time

frames) three-fourth of the times, the portfolio of large-cap,

mid-cap and small-cap has beaten the performance of multi-

cap fund and it increases as the length of investment goes up.

However, it is to be understood that in our study, we have taken

the average results of the mutual funds of respective categories,

which involve good, moderate as well as bad performers. So, if

you can identify good multi-cap funds, you can continue with

your choice of investment. Nevertheless, if you are not

sure--and most of us are not--you can definitely go and make

your own portfolio.

Besides, we have analysed the scenarios with returns as the only

criterion. However, while investing, return is not the only

criterion as the risk-taking ability of the investor matters

equally. In our study, we have considered an equal weighted

portfolio, but you may have different risk-taking ability.

Conservative investors should be low on mid-cap and small-

cap funds, whereas aggressive investors should be high on

mid-cap and small-cap funds taking into consideration a

long-term investment approach. Hence, having your own

unique financial plan is important as it will not just provide you

the broader guideline about your investment portfolio but also

help you to streamline all your personal finances.

Looking at 5-Year average rolling

returns, Multi cap, portfolio of Large

cap, Mid cap and Small cap and Sensex

gave no negative returns.

Cover Story