3 mutual funds for long term financial goals
updated on 28 Sept 2016
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Many individuals are keen to invest in equity mutual funds via Systematic Investment Plans (SIPs). However, most of them don't proceed any further because they don't know which schemes to pick up for investing.

The following are few mutual fund schemes that would help you to create a MF portfolio to achieve your various long-term financial goals.

The following list if based on type of investor like conservative, moderate and aggressive.

SIP investments considered: Rs 2,000-5,000, Rs 5,000-10,000 and above Rs 10,000. We have only considered equity diversified and equity-oriented balanced funds for the purpose of recommendation. We have also assumed that the investor is investing with an investment horizon of five years.
The following parameters are used for short-listing the mutual funds.

1. Mean Rolling returns rolled daily for the last 3 years

2. Consistency for the last 3 years : The 3 year period is divided into smaller time periods each with a progressing weighting.

3. Downside risk : In this case, we have considered only the negative returns given by the mutual fund scheme.
X =Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z

4. Outperformance : Measured by Jensen's Alpha for the last three years. Jensen' Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.

Average return generated by the MF Scheme - [Risk Free Rate + Beta of the MF Scheme * {(Average return of the index - Risk Free Rate}]

5. Asset Size : For equity diversified funds, the threshold asset size is Rs 100 crore, whereas the threshold corpus taken is Rs 50 crore for balanced funds.
1. If your SIP investment is between Rs 2,000-5,000

2. If your SIP investment is between Rs 5,000-10,00

3. If your SIP investment is above Rs 10,000