Focus funds have become a popular concept in the world of investing, introduced by index funds and later adopted by 12 AMCs. These funds select a group of stocks from a NIFTY index based on their liquidity and market cap, regardless of the performance of the broader market. The goal of focus funds is to identify stocks that are experiencing positive momentum and include them in the portfolio as long as they remain in that zone.
Potential Advantages By adding new companies that are exhibiting positive momentum and eliminating equities that have lost momentum or are heading in the opposite direction, the fund manager hopes to maximize the performance of the fund through quarterly rebalancing. Focus funds have the potential to produce strong alpha because the stocks are chosen based on their performance. Since the stocks are selected based on their performance, focus funds can generate impressive initial alpha.
Fortunately, assessing the performance of stocks in focus funds is not difficult for a mutual fund distributor or an analyst, as the portfolio consists of only 30 stocks. This limited number ensures adequate spread and diversification, which helps mitigate systematic risk in the equity market. In the past, the focus funds’ top five performers’ five years of success have led to price increases & XIRR of 20%. Because of their potential to create wealth, focus funds are a desirable choice for long-term investors with an investment horizon of three to ten years or more.
Potential Drawbacks If the focus funds’ criteria and technique are accurate, they should do significantly better than their benchmark. But it’s also critical to take the drawbacks into account. Focus funds typically have a more severe correction when the market as a whole does. It is important for investors to remember this. The funds’ short- and long-term performance are affected if the Fun manager chooses the incorrect funds and if fund management fails to efficiently and properly rebalance the portfolio this can be observed with the dismal performance of few focus funds. Our analysis of dismal performance of one of the very popular focus fund was incorrect selection of stocks and there after failing to do course correction.
However, it is important to remember that past performance is not a guarantee of future results. While focus funds have shown potential for wealth creation, investors should carefully evaluate their risk tolerance and investment goals before considering these funds.
Five Best Performing Focus Funds Based on their 3 years Returns these are first five best performing Focus Funds
HDFC focused 30 Fund
Franklin India Focused Equity Fund
Nippon India Focused Equity Fund
ICICI Prudential Focused Equity Fund
360 ONE Focused Equity Fund
(You may subscribe to our Mutual Fund Research Tool to verify the performance of above quoted Mutual Funds by clicking or copy pasting this link:
urmutualfunddistributor.themfbox.com
Conclusion focus funds offer a unique investment approach by selecting stocks based on their performance rather than the overall market performance. They have the potential to generate impressive returns, but investors should be aware of the potential downsides, such as increased volatility during market corrections, in long term this gets addressed when markets recover. Monitoring the performance of stocks in focus funds is crucial, and investors should consider their risk tolerance and investment goals before making a decision. With careful evaluation and a long-term investment horizon, focus funds can be a suitable choice for wealth creation. If you’re interested in investing in focus funds, you can contact us at 9482590290 or email us at urmutualfunddistributor.co.in. We will help you select the best performers in each category.
By investing through us, you can rest assured that we will monitor the performance of all mutual funds every quarter, ensuring that our investors always stay ahead of market performance.