We’ve recently introduced Mutual Funds on Dhan, starting with a select group of early users and gradually expanding access to those who’ve signed up early.
The response has been overwhelming, and now we’re eagerly seeking your invaluable feedback and suggestions. This marks the initial release of our Mutual Funds feature, with plans to introduce more enhancements and capabilities in the future.
Recognizing that many of our community members would like to delve deeper into Mutual Funds, understand how to choose funds, and more, we’re thrilled to announce our first-ever Ask Me Anything (AMA) session!
Our distinguished guest for the AMA is none other than Mr. Aashish Somaiyaa, the CEO of Whiteoak Capital. With over two decades of experience in business strategy, management, sales, distribution, and marketing of investment offerings, Mr. Somaiyaa brings a wealth of knowledge to the table. Previously serving as the Managing Director and CEO of Motilal Oswal Asset Management Company, he has a proven track record in the financial industry.
Feel free to ask any questions related to Mutual Funds, no matter how basic or intricate they may be. Aashish is here to share his insights and expertise with our community.
This exclusive event is reserved for our community members only, and you can start posting your questions today!
Join us as we explore the world of Mutual Funds with one of the industry’s experts.
1- Diversification in Mutual Funds … Do we need it just like stocks? I have seen people buying Multiple mutual Funds (other then largecap,midcap & small cap) in the name of Diversification .
2- How to choose a fund house ?
By seeing fund size?
By seeing fund performance?
I have seen some big funds give good return in short terms (1-2 years) but low return in long terms (5+yr)… & some some funds Low in short term bug good in long term.
3- How high expense ratio(some big funds have 1% plus ) will affect over mutual funds return?
My Question is
There are so many varieties of mutual fund…such as…large cap, small cap ,direct, indirect, flexi, hybrid , debt and the list goes on. Its a bit confusing for a beginner to choose which is the right one.As a beginner if i have 2000 rupees to invest in mutual fund for every month then where to invest… What are the criteria for choosing a mutual fund???And how would i know what will be the best mutual fund for me and as well as for investment in current scenario of market?
Index funds are giving better returns than actively managed funds do you think this trend will continue? And why is it happening so? What’s your take on this?
How to choose best fund in a particular scheme e.g flexi cap fund.
Does bigger AUM of a fund impact performance of the fund in long term and do we need to choose lower AMU fund.
For a salried person how to achive goals of income using Mutual fund such as kids higher education fund requirement with safty of Market Risk.
Thank you Dhan for giving us this opportunity. My Question to Mr. Somaiyaa are as below:
I want to invest in Debt category Mutual Funds with a expectation of return more than FD, so which category should I go for? and is the debt MF gives guaranteed return like FD? Is the Debt MF safe or there is risk like equity MF?
If i want to invest in a MF who does short term trading in equity and keeps booking profit and increase AUM considerably or takes long or short position in F&O as well then which category i should go for? or where i can find such MF?
I always say if you don’t know what to buy, buy the market. So yes it works. Even as you decide where you wish to head and how to head there, it is important to put the car into gear. Same way if you don’t know where and how to invest, at least knowing that you must invest part of your savings in equity is enough and for that getting into a broad-based index like Nifty 500 in India or S&P 500 of US, is the ideal way to at least get your car into gear.
There is nothing like “best”. If you want ease and simplicity and allocation to equity as an asset class without the need to try and do better than index, then you are fine with passive funds.
On the other hand, it is a well known fact that in order for stock picking to work i.e for active funds to outperform the index what we need is heterogeneity and diversity in markets. As long as there is heterogeneity and diversity in markets the stock picking choices made by portfolio managers will enable them to differentiate outcomes from the index. India is the most diversity right market in the world. We have every sector and in every sector there is large, mid and small cap companies, this results in huge alpha potential. Secondly, our per capita income and level of economic evolution thus far is so nascent that a vast part of India’s economy is not yet reflected in the markets. For example if one were to talk of the USA the next big IPO likely is that of SpaceX at 150 bn USD. Contrast that with India where sev-bhujia, footwear and apparel manufacturers are yet to get listed and where biggest of brands as yet are midcap companies. So I believe that while a lot of people can do just fine with passive funds, there are a set of people who would try and maximise and aim for active outperformance. Lastly, our challenge is that we have noticed every 2 years the alpha performer changes; the one who was top performer goes near the bottom and one from the bottom seems to bounce to the top. This is happening because a lot of alpha is coming from style, sector or market cap bias in the portfolio instead of coming from mere stock picking. Generating alpha over a 5-year period is one thing and generating alpha consistently is yet another, so portfolio construction is key. This is what WhiteOak believes and practices.
In one sentence, to be successful, you have to be probabilistic and not deterministic.
Diversification is needed but not more than 2 schemes in a category. Buying too many funds is a very expensive way of eventually ending up owning the whole market.
To identify a good fund house what you first need to understand is who are the people behind it, in the past fund houses were set up by banks, brokers, NBFCs, industrial conglomerates etc. Nowadays fund houses are being set up by professional fund managers with professional investment and business management teams. These fund houses and the people behind them already have a track record before they hit the market. So seeing who are the people and what is their career trajectory and track record becomes important instead of relying purely on brand as a heuristic. Secondly what is the size of the research team how in-depth is the coverage of sectors and stocks. Lastly, the communication and content is critical because performance can fluctuate but communication has to be consistent and transparent. Evaluate performance for consistency over highest or lowest.
Expense ratios do affect mutual fund returns without a doubt. But all funds report performance but expense ratios so it is incumbent upon a fund to do better than index or peers or any benchmark after factoring in for expenses. Given this fact, making expense as a sole criteria of fund selection doesn’t seem to make sense.
If you don’t understand what to buy the simplest thing to do is to buy a Nifty 500 index fund. If you don’t know what to buy, buy the market. Moving one to actively managed funds if you want to start with an SIP of Rs 2,000 per month, just register two SIPs in a multicap fund each. To identify a good fund house what you first need to understand is who are the people behind it, in the past fund houses were set up by banks, brokers, NBFCs, industrial conglomerates etc. Nowadays fund houses are being set up by professional fund managers with professional investment and business management teams. These fund houses and the people behind them already have a track record before they hit the market. So seeing who are the people and what is their career trajectory and track record becomes important instead of relying purely on brand as a heuristic. Secondly what is the size of the research team how in-depth is the coverage of sectors and stocks. Lastly, the communication and content is critical because performance can fluctuate but communication has to be consistent and transparent. Evaluate performance for consistency over highest or lowest.
If you want ease and simplicity and allocation to equity as an asset class without the need to try and do better than index, then you are fine with passive funds.
On the other hand, it is a well known fact that in order for stock picking to work i.e for active funds to outperform the index what we need is heterogeneity and diversity in markets. As long as there is heterogeneity and diversity in markets the stock picking choices made by portfolio managers will enable them to differentiate outcomes from the index. India is the most diversity right market in the world. We have every sector and in every sector there is large, mid and small cap companies, this results in huge alpha potential. Secondly, our per capita income and level of economic evolution thus far is so nascent that a vast part of India’s economy is not yet reflected in the markets. For example if one were to talk of the USA the next big IPO likely is that of Spacex at 150 bn USD. Contrast that with India where sev-bhujia, footwear and apparel manufacturers are yet to get listed and where biggest of brands as yet are midcap companies. So I believe that while a lot of people can do just fine with passive funds, there are a set of people who would try and maximise and aim for active outperformance. Lastly, our challenge is that we have noticed every 2 years the alpha performer changes; the one who was top performer goes near the bottom and one from the bottom seems to bounce to the top. This is happening because a lot of alpha is coming from style, sector or market cap bias in the portfolio instead of coming from mere stock picking. Generating alpha over a 5 year period is one thing and generating alpha consistently is yet another, so portfolio construction is key. This is what WhiteOak believes and practices.
There will always be good and not so good managers and consistent and inconsistent managers. It is true that a lot of funds and fund managers do not beat the index and further more a lot of them don’t beat index consistently. But I do believe that there is alpha potential in Indian markets. In the last 5 years twice it has happened in 2019-2020-2021 that economic performance and hence corporate performance has been very narrow, lacking in breadth. As a result index performance has been very narrow which presents challenges to active managers. I don’t think this is to be extrapolated to the future especially not so for multicap, midcap and small cap funds or even hybrid funds. Active funds will always have a place.
