Before we shortlist a mutual fund to invest into, it is common to examine its past returns and compare the same with those of other schemes in the same category. The past returns give an indication of how the scheme has performed in the past, thus setting the tone for its future performance.
Here we examine the past returns of a specific category i.e., focused mutual funds.
What are focused mutual funds?
Focused funds are mandated to invest in a limited number of stocks (maximum 30) with at least 65 percent in equity and equity-related instruments. As per the latest AMFI data as on March 31, there are a total of 28 schemes in this category with a total asset size of ₹1.44 lakh crore, and March alone saw an inflow of ₹1,386 crore into these schemes.
There are a total of half a dozen focused mutual funds which have delivered over 25 percent return in the past five years. It is noteworthy to mention that the past returns do not guarantee the returns in future. In other words, just because a scheme has given a good performance in the past, it does not mean it will continue to give the same performance in future as well.
As we can see in the table above HDFC Focused 30 Fund delivered 30.81 percent return and ICICI Prudential Focused Equity Fund gave a return of 28.37 percent in the past five years. Other focused schemes which gave a return higher than 25 percent include 360 One focussed equity fund.
Meanwhile, wealth advisors often recommend investors to factor in other criteria as well aside from past returns of a scheme. These factors include past performance of fund managers, category of scheme, exposure to equity and overall performance of economy. Read this Livemint article for more details.
Note: This story is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment related decision.
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