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Choosing funds: look at long-term show

business Updated: Jul 29, 2011 22:13 IST
Hindustan Times

I want to start a systematic investment plan (SIP) in MF for three to five years. Which fund should I select between ICICI Prudential Discovery Fund Growth and HDFC Premier Multi-Cap Fund Growth. ICICI Prudential Discovery Fund Growth’s three and five-year returns are very good but last six months’ performance is not good while it’s vice-versa for HDFC Premier Multi-Cap Fund Growth. Which fund is good between Reliance Equity Opportunity Retail Plan Growth and Birla Sun Life Dividend Yield Plus Growth Fund? — Hiren Chopra

When an investor is beginning systematic investments, it would be better to start off with relatively more stable large-cap-oriented funds. Two of the funds in your list are multi-cap funds-that invest in all segments of the market-and two are small and mid-cap funds. While these are all good funds in general, you have better starter funds available even within the same fund houses — ICICI Prudential Dynamic, HDFC Top 200, Reliance Regular Savings Equity and Birla Sunlife Frontline Equity, to name a few. Any two of these funds would make a good set of starter funds for your SIP.

Regarding choosing funds based on performance, it would be better to go with the long-term performance number as a better indicator unless there has been a fundamental change in the scheme recently (like a change of fund manager). Long-term good performance indicates a fund’s capability to manage diverse market conditions.

The views expressed are of Srikanth Meenakshi, founder and director,