Which Stocks Do Mutual Funds Own The Most?
This is a list of the top 10 stocks invested in the best performing large cap mutual funds over the past 5 years. A glance at it shows how a majority of the funds have similar portfolio of stocks in it. E.g HDFC bank is a part of the portfolio of all the 5 top funds. Other companies like ITC, L&T, Maruti Suzuki , Indusind Bank, Grasim and SBI are repeated in 3 of the funds. This is not to say that these stocks dont form a part of the rest of the funds too. Maybe they are a fractional portion of the portfolio of the other funds. Since its difficult to go through all the stocks that is a part of a mutual fund portfolio, i have only looked at the top 10 stocks that make up a fund portfolio.
Also the percentages in the brackets beside the mutual fund names are the returns the funds have given over the past 5 years. It ranges from 20.90% to 23.05% which is not much of a variation over 5 years. Looking at the variation of growth and the stocks that form a part of the portfolio which are more or less similar, does it make any sense to spend hours and weeks trying to zoom into the mutual fund you want to invest in? I dont think so. Also, if you are planning to replicate the portfolio of the mutual funds into your own stock portfolio, i think you can follow them. Looking at the stocks in the mutual funds, its a good indication that the mutual funds are confident of the performance of companies like HDFC Bank, ITC, Grasim, Indisind Bank, L&T, Maruti etc.
Also, if all the mutual funds are more or less buying the same stocks, does it justfiy the mutual fund companies taking a significant chunk of money as fees? More or less the funds are choosing the same stocks. As an investor, i prefer to go the direct way. I buy the mutual funds directly from the mutual fund companies.
E.g if i want to buy the Franklin India Flexi Cap fund, i go directly to the Franklin Templeton India website, create an account with them, give my bank details and buy the units.
Why go direct then? Lets take the same fund Franklin India Flexi Cap. When you buy the fund in the traditional way, the expense ratio is 2.30% and when you buy direct, its just 1.48%. The 0.82% might not look big initially. But if you are buying the units over a long period of time using the Systematic Investment Plan (SIP) method, the expenses add up to a significant total. Hence, if you can manage to do the work diligently and afford to spend around 10-15 minutes of your time, you can automate the process and relax.