Best large cap mutual funds to invest in 2020

Large cap mutual funds are going through a tough phase. Many investment pundits have been busy writing the obituary of large cap mutual funds – to be precise, actively-managed large cap funds. They believe that active large cap funds may not be able to beat their benchmark index conivincigly for a long period after the Sebi re-categorization of schemes that mandated strict investment norms for various mutual fund categories.Some optimistic mutual fund advisors and managers counter the claim by pointing out the narrow rally in the market in the last two years that limited gains only to some stocks. They believe that the market conditions are better now, and these schemes may bounce back with a broad-based rally in the market.If you believe Indian markets may continue to favour actively-managed schemes for at least a few years more, you can bet on actively-managed large cap schemes. Otherwise, you can bet on passively-managed index schemes. However, you should keep in mind that active large cap schemes are unlikely to beat their benchmark by a large margin. Also, their ability to beat the benchmarks would reduce in the coming years as the market becomes much more efficient and mature.If you are still interested in investing in large cap mutual funds to take care of your long-term financial goals, here are our recommended large cap schemes. You may invest in these schemes with a minimum investment horizon of five to seven years. Look out for our monthly updates - so that you know whether your schemes are performing up to the mark. Or whether you have to make any corrective actions. We usually come up with our updates in the first week of every month.Here are a few things you should keep in mind. One, large cap mutual funds are recommended to conservative investors looking to create wealth over a long period without exposing themselves to a lot of risk and volatility. However, do not assume that these schemes do not have any risk or they will not face volatility.Large cap schemes, as the name suggests, invest in very large companies – top 100 companies by market capitalisations. These companies are much more resilient to disruptions and they also manage to grow at a decent pace every year. Due to this, they are much more steady than other stocks. That is the reason investment experts recommend large cap mutual funds to conservative investors.Best large cap mutual funds to invest in 2020Axis Bluechip FundICICI Prudential Bluechip FundNippon India Large Cap FundCanara Robeco Bluechip Equity FundHDFC Top 100 FundMirae Asset Largecap FundHere is our methodology:ETMutualFunds.com has employed the following parameters for shortlisting the equity mutual fund schemes.1. Mean rolling returns: Rolled daily for the last three years.2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.i) When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.ii) When H is less than 0.5, the series is said to be mean reverting.iii) When H is greater than 0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.X =Returns below zeroY = Sum of all squares of XZ = Y/number of days taken for computing the ratioDownside risk = Square root of Z4. Outperformance: It is measured by Jensen's Alpha for the last three years. Jensen's Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.Average returns generated by the MF Scheme =[Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free Rate}5. Asset size: For Equity funds, the threshold asset size is Rs 50 crore(Disclaimer: past performance is no guarantee for future performance.)

from Economic Times https://ift.tt/3lcxuJn