- Possible change in long term trend
- This process might have been already started, however it can be confirmed ONLY after the facts
- Trend changes DO NOT happen in a day but rather takes 3-6 months
Have you done your homework?
Market was in bullish trend from beginning of 2012 until now, but this trend might be changing and could turn bearish. Long term trend changes lasts for more than 6-12 months and sometimes even years.
Key questions to ask yourself:
- Do you know where to put your money in bearish markets? - If you don't know then read Strategy part II section.
- Do you know how to select appropriate funds? - This is what we plan to cover in this article
- Do you know how much % of your portfolio you should allocate to each fund? - We will cover this briefly
- Tax liability - We will cover this briefly
You should be aware by now that Bond/Debt funds are better choices during bearish markets. Hence we will NOT cover any equity based funds. But which bond/debt funds to select and on what basis? Appears to be bit confusing and overwhelming, Isn't it? Not to worry, its not that difficult at all.
Keep below links handy as you will need them for your analysis:
- MoneyControl mutual funds performance tracker
- MoneyControl mutual fund advanced search
- Value Research fund performance
- MoneyControl Compare mutual funds
Step 1 - Screening
- Use 1st link provided above and select "Debt Long Term" (from the list on left hand side of that page).
- Sort by "Crisil Rank" by clicking on the header (top row)
- Take a look at 1/3/5 year performance and select 3 to 5 funds
- Now take a look at other categories such as "Debt short term", "Gilt", etc. DO NOT select any funds from "Equity" categories as we expect market to be moving into bearish territory. After going through various categories you shall have a list of 3-5 TOP funds. Lets call this as our list A.
- Now use 2nd link and you can add some more criteria for your fund selection. Again have a list of 3-5 TOP funds. Lets call this as our list B.
- Now use 3rd link and perform same exercise. Again have a list of 3-5 TOP funds. Lets call this as our list C.
- By now you shall have a good list of TOP 5-10-15 funds
Step 2 - Comparison
- Use 4th link above to compare various funds, you can ONLY compare 5 funds at a time.
- What to look for during comparison?
Inception date - Should be more than 5 years at a minimum
Performance - Look at various time periods to remove funds that does not appear to perform well
Entry load - Typically should be 0% meaning NO fees to enter
Exit load - Typically 1% if we exit before holding for minimum period which is usually 1 year
Load comment - Do read them
- Keep doing this for all funds in your list and eventually you will end up with ONLY final Top 5 funds
Step 3 - Portfolio allocation
- Not more than 20-25% should be allocated to single fund
- Holding more than 5 funds may not provide any further advantage unless your investment amount is in crores
- Remember - You can always exit prematurely as this is NOT a Fixed Deposit
Step 4 - Taxation
- Make use of indexation benefit for debt funds
- Understanding Taxation in Debt Mutual Funds
- It is better to be aware and prepared
Based on all the above factors, we came up with below possible fund choices:
- SBI Dynamic Bond Fund (G)
- Birla Sun Life Income Plus - Gr
- SBI Magnum Income Fund Gr
- Kotak Bond Plan A - Gr
- Birla Sun Life GSec - LTF (G)
What are your choices?