Spotlight. 3 quality funds for this Diwali

For retail investors looking at mutual fund investments, walking through the maze of schemes available from 42 asset management companies is a complex task. But some strategies that are easy to follow can help pick the right funds for your long-term goals.

Here are three funds — one each from the equity, debt and hybrid categories — that have stood the test of fluctuating markets over the past 10 years and are suitable for investors with low to moderate risk appetite.

Tata Equity P/E

The fund follows a value-oriented strategy that is true to its name. Tata Equity P/E’s portfolio mostly comprises stocks whose trailing 12twelve months price-earnings ratio is lower than that of the Sensex.

With 10-year compounded annual returns of nearly 20 per cent, the scheme is one of the best diversified equity schemes. The fund invests in stocks across market capitalisation, though there is a bias towards large-cap stocks, especially during volatile markets.

Additionally, by taking cash positions to the tune of 7-16 per cent across cycles, there is considerable downside protection too from market gyrations, from an investor standpoint.

Thus, the fund has been able to outperform its benchmark, Sensex TRI, by 4-9 percentage points over longer time-frames.

A suitable pick for investors with a moderate risk appetite, the scheme is ideal for saving through the SIP route.

SBI Equity Hybrid

The equity-oriented hybrid scheme was called SBI Magnum Balanced earlier and has been consistently delivering above-average returns over the past 20-plus years. In the last 10 years, SBI Equity Hybrid delivered 15.8 per cent annual returns. By taking exposure to low-risk instruments, with mostly the highest rating in its debt portfolio and investing mainly in quality large-cap stocks, the fund has ensured outperformance vis-à-vis its benchmark and several peers over the years.

The scheme invests 65-70 per cent of its portfolio in equity and the rest in debt. The debt portion is dominated by corporate debt instruments, commercial papers and certificates of deposits of top corporates, in addition to government securities. A non-concentrated exposure to large-cap stocks ensures that the fund remains reasonably insulated during significant market corrections.

SBI Equity Hybrid is an appropriate addition for low-risk investors, especially for those just beginning to invest in mutual fund investments.

Aditya Birla SL Corporate Bond

Called Aditya Birla Sun Life Short Term earlier, this bond would be a good addition to the debt portfolio of investors with low risk-taking propensities. ABSL Corporate Bond has actively managed the maturity profile of its portfolio well to sail through multiple interest rate cycles.

The fund has generally stuck to a short-term duration strategy. Over the last three years, the modified duration of its holdings have come down from 1.9 years to 1.31 years; it has generally remained less than two years over this period. In a rising interest rate scenario, short-term funds are likely to do well and, hence, are preferred. But even in other cycles, the ABSL Corporate Bond has done well.

With its holdings almost entirely held in debt instruments with the highest or very high ratings — AAA, A1+, AA+ and sovereign — the portfolio is low on risk.

It has delivered a solid 8.5 per cent annually over the past five- and 10-year periods. If held for more than three years, there would be indexation benefits on capital gains made during the sale of units. You can buy units of the fund at periodic intervals by investing lump-sums, as a part of your debt portfolio.

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