2018 was a down year for most Mutual Funds including the one's selected by us at the beginning of the year. (See full report here.)
As we have said before, this is to be expected from time to time. In fact 1 out of every 3 years has been negative for the stock markets historically.
We need to follow our Mutual Fund selection strategy consistently, through ups and downs, to get the most out of it. Not following a strategy is as good as not having one.
Accordingly, based on the updated data for 2018 and our selection strategy, we now have the new list of best Mutual Funds for 2019.
How do we select Mutual Funds
At Goalwise we use a data-driven and rigorously backtested Mutual Fund selection strategy that has given market-beating returns in the past.
We take into account multiple variables like past returns (short, medium and long term), consistency, alpha, size etc to select Mutual Funds that have a strong chance of giving higher returns in the future.
Of course, we won't get all of them right but this is a very important point. Many popular Mutual Fund lists/ratings are just trying to predict the past i.e. they are just shortlists of funds with good past performance and lack any predictive value (such funds might even be past their peak performance for all you know).
We update our recommendations at the beginning of every year where we take the latest Mutual Fund data into account and re-run our predictive algorithms to come up with the best funds for that year. Again, we won't get all of them right, but on average over the long term we should do better.
Best Mutual Funds for 2019
Tax Save (ELSS under section 80C of the IT Act - 3 year Lock-in):
- Aditya Birla Sun Life Tax Relief 96 - Growth
- Axis Long Term Equity Fund - Growth (New)
- Canara Robeco Equity Tax Saver Fund - Growth (New)
Risk category: Low (Large Cap funds)
- Axis Bluechip - Growth (New)
- HDFC Index Fund - Sensex Plan - Growth (New)
- Canara Robeco Bluechip Equity Fund - Growth (New)
Risk category: Moderate & High (Multicap Funds)
- Axis Focused 25 Fund - Growth (New)
- Mirae Asset India Equity Fund - Growth
- Kotak India EQ Contra Fund - Growth (New)
- Invesco India Growth Opportunities Fund - Growth
Risk Category: Low/Moderate/High
Smarter Savings (substitute for savings account or FD; no exit load):
- Kotak Savings Fund - Growth
- Aditya Birla Sun Life Savings Fund - Growth (New)
- IDFC Low Duration Fund - Growth
Emergency Goal (Liquid funds with Instant Redeem option):
Why have so many funds been changed?
We only recommend the 3-4 best Mutual Funds from hundreds in each category, and since some of them were not doing well they have been replaced by their better performing peers.
Also, due to the new SEBI recategorisation norms, a lot of funds have moved across categories, thus forcing us to change them as they no longer belonged to the same category that they were in at the beginning of the year.
Why no Mid & Small cap funds in the high risk category?
There are three reasons for this -
a) Risk is determined more by the equity-debt asset allocation than the type of equity or debt funds you are investing in. Under high risk selection, we have an up to 100% allocation to equity which makes it 'risky' enough.
b) Multicap funds already have 20-30% exposure to mid & small cap stocks which is good enough even for high risk profile investors. Also, in Multicap funds, if the fund managers sense more opportunity in mid & small cap stocks, they can easily allocate more to them as they are not restricted to any specific market cap. Hence there is no need to add separate Mid & Small cap funds.
c) Last but not the least, over the last year we have observed that most investors who think they have a high risk profile actually dont have one. They are prone to panicking at the slightest negative returns and then they blame the fund selection. Having mid & small cap funds just exacerbates this issue.
We also allow our investors to choose their own funds while investing but we do not encourage it since we don't know how these funds have been selected and when to replace them since they are already not on the top of our list. So in effect such goals then go out of the purview of our advisory.
We have partnered with the following Mutual Fund companies and all of their funds are available with us:
Aditya Birla Sun Life Mutual Fund
Axis Mutual Fund
Baroda Mutual Fund
Canara Robeco Mutual Fund
DSP Mutual Fund
Edelweiss Mutual Fund
Franklin Templeton Mutual Fund
HDFC Mutual Fund
ICICI Prudential Mutual Fund
IDFC Mutual Fund
Invesco Mutual Fund
Kotak Mutual Fund
L&T Mutual Fund
Mirae Mutual Fund
Motilal Oswal Mutual Fund
PPFAS Mutual Fund
Principal Mutual Fund
Reliance Mutual Fund
SBI Mutual Fund
TATA Mutual Fund
UTI Mutual Fund
You can also see this list (and the brokerage we receive from them) at https://www.goalwise.com/commission