Are you searching for a mutual fund to start a monthly SIP? Are you confused about which mutual fund you should pick? Are you unaware of how to judge a mutual fund? Let's learn all in this article.
Going by its name, it is easy to judge that the Parag Parikh Flexi cap fund invests in all types of equities i.e. large-cap, mid-cap and small-cap. Since its inception in 2013, it has given an average return of 18% per year till now against its benchmark index's (Nifty 500) return of just 6.6% per year. While the average category return of Flexi cap funds in the last 5-year period is 12%, it has generated returns of almost 17.5% in the same period. But as I have always been saying, we cannot invest in a mutual fund just on the parameter of its historical performance. Hence, let's check the other parameters of the fund before seeing if it is a good time to start investing in it.
Analysing the Portfolio of Parag Parikh Flexi Cap
Parag Parikh Flexi cap fund is holding around 27 stocks in its portfolio of which nearly 56% of them are in the large-cap category and the rest are mid and small-cap companies. So, we can see that the fund is playing it safe by allocating a large part of its AUM to the top 100 companies. Other than this, one thing that investors should note is the fact that apart from Indian equities, it has also invested in foreign companies like Suzuki Motors, Alphabet Inc (Google), Microsoft, Amazon and Meta (Facebook). Apart from equities, it has also invested approximately 10% of its capital in debt or the money market.
In Feb 2022, almost 30% of its total portfolio was invested in these 5 foreign equities but since then its allocation to foreign companies has slowly declined to 22% as of drafting this article. The main reason behind this decline is the fact that SEBI has restricted Indian mutual funds to invest in foreign companies since Feb 2022.
Analysing its Risk Profiles
As PPFCF has invested a large sum of money in large-cap equities and also has a significant sum in the debt market, its volatility is relatively lower. This can also be seen in its standard deviation score of 19.3 against the category average of 20. The lower the standard deviation, the better it is for the investors.
Coming to the Sharpe Ratio, PPFCF has a score of 0.95 against the category average of 0.62. Sharpe Ratio is the measure of performance vs risk. The higher the shape ratio, the better it is for the investors.
It has a huge AUM size of 24,500 crore INR while others in its category have an AUM of roughly 5000-10000 crore INR. This shows that the fund has more investors than its competitors.
Should You Invest In It?
If you are someone who wishes to invest some part of your portfolio in multiple caps of equities while not wishing to take up much risk, this can be the fund you are looking for. It has a minimum investment amount of ₹1000 and the expense ratio is at 0.7% which is pretty reasonable. There is an exit load of 1% if redeemed in under 2 years. This should not be an issue as equity mutual fund investments are meant for long-term purposes.
That's all for now. I hope you have learned something new. Consider giving a like and sharing it among your peers. To get notified of new articles, sign up at NerdyTree.
Note: Investment in equities is subject to market risk. This article is for educational purposes and is no piece of recommendation. Please do your due diligence before venturing into the market.
Let me know your thoughts in the comments below.