HDFC Mid Cap Opportunities is the largest actively managed equity fund.

Its AUM (~ Rs 48,000 cr) is bigger than widely discussed funds like PPFAS Flexi Cap (2nd biggest fund).

But why’s this scheme from @hdfcmf such a hit?

We analyzed its performance & strategy. A 🧵 Let’s start with performance.

This @hdfcmf scheme has been around for over 15 years.

Had you invested Rs 10,000 every month since its launch, your money would have grown to:

This fund: Rs 1.25 cr

Benchmark (NIFTY Midcap 150): Rs 94.80 lakhs
It’s surely impressive.

BUT…

Want better returns from mutual funds?

Invest in schemes that hold UP TO 50 stocks.

That’s what our analysis shows when we looked at 4 categories:

Large Cap
Mid Cap
Small Cap
Flexi Cap

Of course, there are exceptions, like Nippon India Small Cap (~190 stocks).

Details in🧵 First, a brief on how we analysed the 4 categories.

We placed all funds under 4 buckets.

A. Funds with 50 stocks or less
B. 51-75 stocks
C. 76-100 stocks
D. Over 100 stocks

We checked the performance of schemes in each bucket for the past 6 years.

Let’s see what we found.

You can choose from 10 NPS fund managers at present.

But picking the right one is crucial.

Why?

The difference between the best & worst performers is sizable. (See image)

So, we crunched the numbers to find the best-performing #NPS fund managers.

A 🧵 First, some essential basics.

As an NPS investor, you can spread your money across 4 asset classes (See image)

To find out the best fund manager, we dissected their performances in all 4 asset classes.

We also went one step further in our research.

Parag Parikh Flexi Cap has a proven track record.

But it has no exposure to exciting sectors like:

Railways
Defence
Infra
Renewable energy
EV
Rajeev Thakkar, CIO of @PPFAS Mutual Fund explains why.

He also shares why PPFAS doesn’t have a small-cap fund.

A 🧵 Mr Thakkar recently wrote a letter to PPFAS MF’s unitholders.

We found 3 points quite interesting:

1. Why PPFAS doesn’t invest in many exciting companies
2. Why it doesn’t plan to launch a small-cap fund
3. What returns investors should expect from equities hereon

Last week, some BIG changes were rolled out in 3 savings schemes:

- PPF
- Senior Citizen Savings Scheme (SCSS)
- Post Office Fixed Deposit

Some of these changes bring cheer

But a few are also unsettling, especially the one in FDs.

Let’s look at them in detail.

A 🧵 1. PPF

Let’s discuss some basics first, which are relevant to the recent changes.

PPF matures after 15 years.

Post that, you can extend it in the block of 5 years.

So, you can stay invested in PPF for as many years as you want.

We receive a lot of questions about mutual funds.

But there are 5 queries that new investors repeatedly ask us. (See image)

We decided to answer all of them here.

Please like and retweet, as it will help new investors get answers to their questions.

A thread 🧵 1. BEST MUTUAL FUND TO INVEST

Broadly, there are 2 scenarios:

A. Investors want to make a one-time investment (like Rs 1 lakh, 2 lakh, etc)

B. Start an SIP (of Rs 5,000 or 10,000 a month)

Check how you can approach both situations. 👇

SENSEX is down ~3.7% in the last 5 days.

Why?

Elevated U.S. Treasury yields.

Israel-Hamas war.

But guess what? This fall is NO BIG DEAL.

Markets witness 10%-20% temporary declines almost every year. (See image)

What can investors do?

A 🧵 First, let’s see why the equity markets have fallen.

Media reports suggest 2 key reasons:

One, the yield on 10-year US government bonds rose to 5%, the highest in 16 years.

This could mean foreign investors exiting Indian stocks to invest in safer US govt bonds.

Festive season brings some great deals.

But many discounts are mere deceptions.

So, before snagging a "bumper deal," remember these 7 tricks advertisers use.:

Decoy Price
Inflated MRP
Magic Number 9
Removing Commas
False Urgency
Family Pack Discount
Affordability Illusion

A🧵 1. DECOY PRICE

Say, you have two price choices: Rs 25 and Rs 45.

Many would prefer the cheaper option.

So, to encourage you to go for the higher price, advertisers add a third option, like Rs 42.

This makes the Rs 45 option seem more appealing for just Rs 3 extra.

How much pension will you get from NPS after you retire?

Well, it depends on 3 things.

1. Corpus
2. Annuity variant
3. Insurer

Say, a 60-year-old buys an annuity for Rs 1 cr today.

His monthly pension can range from Rs 44,750 to Rs 77,000.

What should you keep in mind?

A 🧵 First, some basics.

NPS matures when you turn 60.

Of the total money accumulated, you can withdraw up to 60% tax-free.

With the remaining 40%, you must buy an annuity plan from an annuity service provider (insurance company).

In return, you can get a lifelong pension.

The 4% rule is a popular strategy to plan an EARLY RETIREMENT.

How does it work?

Create a corpus 25 times your first-year expenses on retirement & withdraw 4% from it every year.

But it’s TOO SIMPLE, and following it in India can be a BIG PROBLEM.

A 🧵 Let’s begin with an example.

Say, a 40-year-old wants to retire at 50.

He assumes his first-year expenses post-retirement = Rs 12 lakh (Rs 1 lakh a month).

As per the 4% rule, the retirement corpus should be 25*12 lakh = Rs 3 crore.

Will this be sufficient? Probably, NO.

No easy hacks.

No wisdom from books.

No quotes from legendary investors.

Just 10 simple rules to take control of your finances:

Net worth rule
Rule of 72
Rule of 70
100-Age Rule
50-30-20 Rule
6X Rule
20X Term insurance
40% EMI Rule
25X Retirement Rule
10% hike rule

A 🧵 1. THE NET WORTH RULE

This rule originated from 'The Millionaire Next Door' book.

It has a simple way to determine if you are wealthy in the US.

Multiply your age by your pre-tax annual income & divide by 10.

If your net worth surpasses the result, you are wealthy.

For govt employees, #NPS could change forever.

Courtesy, a move by the Andhra Pradesh (AP) govt.

The state plans to bring a GUARANTEED PENSION SCHEME for its employees using NPS.

Reportedly, this move has prompted the Central govt. to look into the AP model.

A 🧵 What is Andhra’s GUARANTEED PENSION SYSTEM?

Currently, state and Central govt employees invest a part (10%) of their salary in NPS.

The governments contribute another 14%.

However, the pension is not guaranteed, as NPS is market-linked.

HDFC Balanced Advantage’s recent performance is impressive.

3-year returns:

NIFTY 50 TRI: 23%

HDFC Balanced Advantage: 31%

The fund has also beaten the category average of all actively-managed diversified equity funds, except for small-caps.

How has the fund done it?

A 🧵 Two crucial things about Balanced Advantage Funds (BAFs).

1. BAFs change their equity and debt allocation based on the market’s mood.

They increase equity exposure when markets are cheap.

They sell stocks to reduce equity allocation when markets are expensive.

Returns of small & mid-caps are off the charts.

10-yr CAGR returns:

Mid caps: 22%
Small caps: 21%

Returns are tempting.

But veteran fund manager S Naren feels it’s time to move to something safer.

This advice stems from a lesson he learned in the 1990s.

More insights in🧵 First, some context.

Earlier this month, S Naren addressed the Tamil Nadu Investors' Association.

He shared some key investing lessons he has gathered from his 34-year journey as an investor.

We have tried to summarize the essence of his talk.

Here are 5 lessons.

India’s bond moment is here.

No, it isn’t about a Bollywood remake of a James Bond film.

Indian govt bonds have secured a spot in JP Morgan's Emerging Markets bond indices.

This could bring BILLIONS of dollars.

And it can impact bond markets, rupee & your investments.

A 🧵 This topic involves some technical concepts and jargon like FAR, derivatives benchmarks, etc.

We have simplified things to make this easy to understand.

Let’s start with some background information. 👇

Nippon India Small Cap fund has 193 stocks.

And it’s a topper in its category.

Traditionally, over-diversification is considered a bad thing.

But some funds are bucking this trend. (See image)

Let’s deep dive to understand the ‘why’ and ‘how’ of this.

A 🧵 Several equity funds nowadays appear comfortable running fat portfolios.

There are nearly 20 schemes packed with 80 or more bets, compared to just 4 such schemes two years ago.

In fact, five of these schemes have over 100 stocks.

Flexi Cap funds can be exciting.

They can invest 100% in large-caps, or mid-caps, or small-caps, depending on mood of the market.

But, surprisingly, they prefer to remain mostly in large-caps. (See image)

Can it impact your Portfolio returns?

We did a detailed analysis. A 🧵 First, some basics.

Until late 2020, there was no Flexi Cap category.

SEBI introduced it in Nov 2020. (Details in table)

Post that some AMCs launched new schemes under this category, while many rechristened their existing funds.

Now, there are 37 Flexi Cap funds.

The latest Sovereign Gold Bond (SGB) issue is here.

You can get 1 gram (or 1 unit) of SGB at Rs 5,873.

Typically, you get old SGBs (traded on stock exchanges) cheaper than the new issue.

But this time, the fresh issue looks like a better deal.

A thread 🧵 First, some basics.

SGBs mature in 8 years.

On redemption, you get the prevailing market price of gold.

You also earn an interest of 2.5% every year on the issue price.

There are two ways to buy SGB units:

- New issues (through banks)

- Old issues (on exchanges)

PPF matures after 15 years.

But what if you need money before that?

Can you withdraw funds before maturity?

The answer is yes. But the rules around it are complicated.

Here's a simple explanation of the rules for taking out money early from your PPF account.

A 🧵 Broadly 2 conditions complicate PPF partial withdrawal rules:

1. The year from which you become eligible for partial withdrawals

2. The amount you can withdraw

Once you understand these two aspects, things become fairly simple.

So, let’s begin with the first one.

Home loan rates have risen from 6.6% to 9.1%.

It means a 20-yr loan could now be well over 100 yrs (See image)

This ‘UNREASONABLE ELONGATION’ in repayment tenures has miffed #RBI.

But why did this happen?

How can borrowers deal with it?

What RBI plans to do about it?

A 🧵 Let’s start with the basics.

Most banks have tied their home loan rates to the repo rate.

Now, in less than 12 months (between May 2022 & Feb 2023), RBI has increased the repo rate by 250 basis points (from 4% to 6.5%).

So, home loan rates have also jumped.

Most of us want to invest in the “best” fund.

Not even the 2nd best or the 3rd best, but the absolute best.

But even investing in the ‘worst’ funds isn’t that bad.

You would have made ~12.5% returns if you invested in the WORST FUNDS of the last 10 years.

A thread🧵 Let’s assume you picked the 3 worst performers of 2012.

At the start of 2013, you made a one-time investment of Rs 1 lakh in each fund.

On Jan 1, 2014, you redeemed your money.

Then, re-invested the amount in the worst performers of 2013.

You kept doing it for 10 yrs.