Dal Chawal Mutual Fund? Explains Radhika Gupta of Edelweiss Mutual Fund
While comparing the balanced advantage and the tough hybrid mutual funds to dal-chawal, The President at Edelweiss Mutual Fund, Radhika Gupta gave tips to new investors today not to invest in the poor, thin-line obligation funds that work only in one cycle and not in the next.
She posted on X, “A Dal Chawal fund is basically an endowment that an employer may provide for the employees. Category-based mutual funds for women are comprehensive solutions as well as total solution kind mutual funds. With more flexibility, more complex, larger and middle-sized and more extensively covering 500–250 stock title indices. Whether it functions as an active or passive one, it does not matter; what is undesirable is not a fund, which demonstrates successful operation in one certain cycle meanwhile being ineffective in the next one.”
She mentioned that she had seen a portfolio where Rs.27000 was deployed through a SIP every month and was distributed across 31 funds. Among the 31 funds, the flows of 15 mutual funds were through narrow sectoral funds.
She further said, “I recently saw a portfolio of an investor with a 27,000 monthly SIP, and across 31 funds, 15 were narrow sectoral ones. A grave risk in these times is to overcrowd the portfolio with narrow idea funds that are, at best, satellite portfolios. You know, 80% of your portfolio should be ‘dal-chawal’ funds.”
Radhika Gupta also came up with some interesting facts about sector rotation. She continued to say that in the long run, the returns of most sectors equal the returns on the market. Therefore, normally, the ‘buy and hold’ strategy on a sector fund will hardly deliver a superior performance to the market average.
She further explained some facts about sector rotation, as sector funds are the flavour of the month these days:
1. In the long run, the returns of most of the sectors tend to harmonize with those of the market. Thus, rarely would a buy-and-hold strategy in a sector fund outperform the market.
2. From a mediumistic perspective, the sectors indeed manifest cyclogging. Thus, if one truly has his or her timing right in terms of getting into and out of the position, there is alpha to be had. That was a hard one. It pointed out that defence and manufacturing funds are today not at the bottom of the cycle classifications. It is equivalent to the fact that exit calls are also infrequent.
3. The multicap and flexicap-style funds were not aggressive when it came to sector rotation. My suspicion is that prophesying cycles and the outcomes in sectors aren’t easy. Banks have actually performed poorly when rates have gone up recently, contrary to those predictions. Tech did well in recessionary Covid time which is counterintuitive.
A user has commented on the post, “Mam, you could have called it Thali Meals Fund, which contains something or the other and dal chawl or roti being the prominent part.”
As for accusations from another user that active and passive do not bring anything, the following is worth mentioning, “Why do active and passive don’t matter? Once you decide to take dal chawal, home-cooked food is indeed better than getting it from Zomato and having to pay extra bucks with the uncertainty of the quality of the food you are getting!”
