How to earn high long-term returns from mutual funds: 4-point formula from Dhirendra Kumar of Value Research

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Published: April 5, 2018 1:16:03 PM

Even as the stock markets enter into the new financial year, Dhirendra Kumar of Value Research says that long-term investors must not get distracted from their plans, and must allocate significantly to equities.

Dhirendra Kumar's 4-point formula to invest in mutual funds.“Most investors get attracted by the past performance. They chase past performance but that is not a great way to start and they actually get scared when it is a great time to invest in the market,” Dhirendra Kumar said.

Even as the stock markets enter into the new financial year, Dhirendra Kumar of Value Research says that long-term investors must not get distracted from their plans, and must allocate significantly to equities. In an interview to ET Now, reputed mutual funds veteran from Value Research, Dhirendra Kumar said that investors must keep the process simple, and follow a four point approach- fewer funds, regular investments, never invest in lump sum and keep an eye on equity allocation.

Sharing his insights on how to tackle the asset allocation, Dhirendra Kumar said that in case the allocation becomes 95% or 60% investors must rebalance, and realise a part of gains and move it into fixed income. “Most investors get attracted by the past performance. They chase past performance but that is not a great way to start and they actually get scared when it is a great time to invest in the market. So, planning on this basis will only work,” he told the channel.

Dhirendra Kumar said that investors must make small cap stocks an integral part of the portfolio. However, for newer investors, the expert suggests starting  out with a balanced fund even for long-term investment. In the same interview, Dhirendra Kumar pointed out that smallcap and midcap mutual funds provide the best returns in the long-term if the investor remains invested even during bad times. However, for conservative investors, he suggests multi-cap and balanced funds.

So, which mutual funds should investors look to invest in? “ Listing the large cap funds – ICICI Prudential Focused Bluechip, Motilal Oswal Focused 25, Mirae Asset India Opportunity — a long term fairly impressive fund over a long period of time and SBI Bluechip Fund,” Kumar said.

From the balanced category, Aditya Birla Sun Life Balanced 95, HDFC Balanced, ICICI Prudential Balanced and Tata Balanced. In the tax savings category, Kumar said that he is apprehensive about these funds’ ability to replicate their performance. However, he recommends Reliance Tax Saver and Birla Sun Life Tax Relief for aggressive tax savers.

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