Risk in investing in equity mutual fund with Sensex at 28,000 Pts

Take a look at some of the mutual fund schemes, you could invest in. One thing we must mention is that the Sensex is trading very high at 28,000 points and the Sensex p/e is close to 19 times, 1-year forward earnings. What this also means is that it is trading way above the average of 17 times. So, if you are investing now, the worry is that you are buying an equity mutual fund scheme at very high prices. One thing worth mentioning is that most large cap mutual fund schemes have the same portfolio, with HDFC Bank topping the list.

SBI Blue Chip Fund

This has to be one of the best large cap funds to invest in. The portfolio is solid and the performance has been superlative in the last few years. Let us first take a look at some of the other details of the fund. SBI Blue Chip Fund has sizeable assets under management of almost Rs 8,000 crores. What this also means is that a lot of investors have invested in the scheme. One positive aspect of the fund is that the expense ratio is very low at 1.98 per cent. This compares very well with other funds, who have an expense ratio sometimes of even more than 3 per cent.

Why to invest in SBI Blue Chip Fund?

There are a number of reasons why you should invest in the SBI Blue Chip Fund Scheme. As we mentioned since the expense ratio is low, the returns are higher for investors. The portfolio of the fund is pretty good and one good thing is that it seems to have cut exposure to IT stocks. It has increased exposure to Reliance Industries, which now has the second highest weightage in the portfolio after HDFC Bank. Interestingly, the portfolio looks solid with HDFC Bank, Reliance Industries and Mahindra and Mahindra in the top three. If you buy into the growth fund of SBI, the net asset value if Rs 32.58 and on the other hand the growth plans comes with an NAV of Rs 32.58. The solid looking portfolio with lesser exposure to IT is another reason why an investors can look at SBI Mutual Fund.

Returns from the fund?

The biggest reason for betting on SBI Mutual Fund is the returns the fund has generated in the last few years or put it straight since inception. A fund that can generate returns of 11.36 per cent on an average each year, since its launch in 2006, is not a bad bet. In fact, the three-year returns of the fund is 23.73 per cent on an average each year, which is not bad at all. The company's portfolio is more skewed to stocks that can give return more in the long-term, like Reliance Industries. Typically, if you want to invest in the scheme, you must have a more long-term perspective in mind.

Birla Sunlife Top 100

This is another fund that we like, but, it is always so difficult to get the highest returns from the scheme The fund has generated decent returns, though its expense ratio is not as low as SBI Blue Chip Fund. In fact, the expense ratio of the fund is slightly higher at 2.38 per cent.

We like the fund because of its portfolio, which is slightly skewed towards the banking sector, which we believe will outperform in the years to come. ICICI Bank and HDFC Bank, remain two of the top in the portfolio of the fund.

Returns from Birla Sunlife Top 100

The returns from Birla Sunlife Top 100 has been more or less in line with other equity mutual fund schemes. The fund has generated a return of almost 23 per cent in the last three years and a return of a staggering 18 per cent in the past 5 years.

The scheme is a good bet from a long-term perspective.

Disclaimer

The article is not a solicitation to buy, sell in securities or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.