Investors typically prioritize mutual fund returns, but factors like rolling returns, volatility, and the number of stocks in the portfolio also impact performance.
When choosing mutual funds, investors often focus on returns. However, the number of stocks in a fund’s portfolio is a crucial factor that many overlook.
Impact of Number of Stocks on Performance: - Less than 50 stocks: 8 schemes - 50-75 stocks: 18 schemes - More than 75 stocks: None
Performance Comparison: - Up to 50 Stocks: Average rolling return of 13.51% - 50-75 Stocks: Average rolling return of 13.05%
Understanding the Trend: - Over-diversification may lead to diluted returns. - Funds with fewer stocks tend to perform better.
While funds with fewer stocks perform better, it should not be the sole criterion for selection. Investors should consider other parameters as well.
Exceptions to the Rule: - Some funds perform well despite holding a large number of stocks. - Nippon India Small Cap and HDFC Large and Mid Cap Fund are examples.
Monitoring Your Fund’s Performance: Increasing the number of stocks may not be a concern. Consider switching if the fund consistently underperforms its peers.