Introducing: Mutual Fund Portfolio Corner

I have now been advising HNI clients on investing for three years, on behalf of a bank. Thanks to the easy logistics, we have a research team in the back-end which cuts the clutter beautifully to send us a list of simply 5 funds in each category that need to be considered in our recommendations.

But, as I work towards embarking on this journey of advising people on money, and especially investing on my own (more on that later), I realised two things. One, I no longer have the luxury of getting that list and not having to use my own discretion. Two, I owe it to myself and to anyone whose financial life I might touch to then look deeper into this increasingly cluttered world of mutual funds.

What is the Mutual Fund Portfolio Corner?

SEBI, in my humble limited opinion, is one of the most stringent regulatory authorities. In an attempt to make everything transparent for investors, every AMC now uploads a detailed view of their portfolios online.

But, with the amount of information, how do you make sense of it unless it gets sorted into a somewhat understandable structure? That, in short, is my attempt in this effort.

The idea is to look at six of the biggest, most basic equity fund categories (for now, and if things get into a good rhythm then I will work to adding more from hybrid and debt as well). I will publish data on some parameters of the top 10 funds by AUM in each of the chosen categories (since that will cover atleast about 75-80% of the fund category AUM).

As for the data points, you can expect the AUM, expense ratio, returns in the month (as compared to benchmark), market cap break-up, top 5 industries and top 5 sectors. The intent is to move conversations beyond simply historical returns.  

What’s the process behind this?

When I looked at mutual fund data across different portals, often information seemed different and I didn’t really understand the mechanics of it. So, here I will lay down what am I really doing to get to the data that I will present going forward.

1. All AMCs upload their portfolios of the previous month ending by 8th or maximum by 10th of the next month. AMFI has a convenient page from which you can go to any of the AMCs and their monthly portfolio disclosure. While most AMCs used to have a full AMC download in one excel sheet, now a lot of them have scheme-wise excels probably to make it easier to work on with lighter sheets.

2. I am using the AMFI categorisation for market cap and industry classification (merging it in a few cases). This makes it very different from the NSE categorisation in both instances. The AMFI market cap categorisation (updated bi-annually) is easily downloadable from here. As for the industry classification, while I did not find a handy list I depended on the portfolio classifications by the various AMCs since they all follow the AMFI system. Some of the biggest differences in industry classification lie in how NSE clubs things into Financial services whereas AMFI distinguishes between Banks, Financial and Insurance. Similarly, Consumer Goods and Consumer Services are very big all-encompassing categories in case of NSE. But, within AMFI the classification is a little more in-depth.

3. For the returns and any other data linked to it, I am using Direct schemes of Mutual Funds. For some time now, I believe the right way to invest is to separate fund management fees from broker commission. Pretty similar to how I don’t believe in mixing insurance with investing. But, but, but this comes with a very important caveat! Do not venture into investing on your own if you have not devoted enough time to understand how it works. Find an advisor you trust and pay for quality advice! When we have now evolved enough to pay for fitness advice, dietary guidance, why not pay for advice that helps you make the best use of your money? In case I was not clear, pay for the advice you get!!

4. All the computing and data processing is done using thy humble servant – Microsoft Excel. Yes, it is indeed possible. So, I essentially cobble together sheets of the ten funds in the category into one workbook. Consolidate share holdings in a separate workbook for all ten and then work on them to arrive at information that can be used and consumed easily.

The main use I see of this process is to be able to view in one shot the most important funds of the category and understand the mechanics behind what they are doing. I will also put some comments which you, as an investor, may or may not agree with but will still leave you with some food for thought. Doing this as a monthly practice will also help you see the portfolio movements with time. After all, performance is a result whereas portfolio is the process. Putting the latter under the scanner can make you more proactive, rather than reactive.

I intend to publish details of portfolios ending September 30th, 2021 by 15th October. 15th is my intended timeline for the future months, too.

So, here’s to diving deeper into the best thing money can buy – mutual funds! 🙂

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