How many stocks do outperforming funds have in their portfolio?
Investors often check data like returns and volatility while picking mutual funds. One unusual metric that most investors don’t worry about is the number of stocks in a fund’s portfolio. Can this number impact returns? Alternatively, is there an ideal number of stocks that outperforming funds have? To find out, we conducted a study on four basic types of equity funds: large-cap, mid-cap, small-cap and flexi-cap funds. We first pulled the lists of funds in each category and then checked the number of stocks in their portfolios for the last six years, i.e., 2018 to 2023 (August-end data). We then took the median of the six values for each of the funds. After that, we placed the fund in one of the following brackets in terms of the median number of stocks in the portfolio over the last 6 years: up to 50 stocks, 51-75 stocks, 76-100 stocks and more than 100 stocks. We then checked the average of the three-year average rolling returns for each of these buckets between August-end 2018 and August-end 2023. Next, we averaged all the three-year average rolling returns of the funds that had a certain range of stocks. These ranges are the same as we defined earlier, i.e., 0-50 stocks, 51 to 75 stocks, 76 to 100 stocks and 101 or more stocks. That’s how we got the average of the three-year average rolling returns. But why this time band of 2018 to 2023 and why only three-year rolling returns and not five-year or 10-year returns? That’s because SEBI’s recategorisation happened only in 2018. Before that, there was no uniformity in the way funds were managed. Also, many funds changed their mandates post recategorisation. So, we couldn’t have used five-year or 10-year rolling returns as doing so would have resulted in a discrepancy. In our study, we also compared the returns with the three-year average rolling returns of the respective benchmark indices as well. Watch the video to find out how many stocks outperforming funds usually have. You can then use this metric in conjunction with other metrics to pick the winning funds for your portfolio. Chapters: 00:00 Introduction 01:13 A Quick Background 02:07 How many stocks do top performing large cap funds have? 02:55 How many stocks do top performing mid cap funds have? 03:44 How many stocks do top performing small cap funds have? 04:20 How many stocks do top performing flexi cap funds have? 05:12 Conclusion #ETMoney 👉 To invest in Direct Plans of top Mutual Funds for free, download the ET Money app: https://etmoney.onelink.me/unJQ/5ca1ae3b 👉 Subscribe to ET Money Hindi / @etmoneyhindi 👉 Explore Stock Investments: https://www.etmoney.com/stocks 👉 Learn about stock investments: https://www.etmoney.com/learn/stocks/ 👉 Follow us on: ► Facebook: / etmoney ► Twitter: / etmoney ► Instagram: / etmoney_official ► LinkedIn: / et_money
