Why Mahindra Manulife Focused Fund Could be a Strong Investment in Volatile Markets?
Focused funds have performed reasonably well during the market rally following the COVID-19 epidemic. Many funds in this category are large-cap-orientated, yet they have outperformed broad-based indexes.
The Mahindra Manulife Focused Fund is different from other funds, given its large-cap orientation thus, it has all the makings of a good investment vehicle for investors in today’s market. The fund strikes a reasonable balance between risk and return, thus offering a prudent investment opportunity to feverish market conditions.
This has been one of the best-performing funds since the COVID-19 pandemic and, in particular, during this market rally. Most of these focused funds have a heavy large-cap bias that gives them an edge over broad-based benchmarks. Large-cap-oriented schemes have been outperforming across market conditions due to apt stock picking and careful risk management.
The Mahindra Manulife Focused Fund’s large-cap orientation is an important risk-reducing strategy in itself. While mid-cap and small-cap stocks tend to witness rallies in mammoth proportions and their valuations go through the roof, large-caps are a far more steady bet. The recent sparkle in mid and small-caps has stretched valuations beyond comfortable levels, making large-cap stocks a safer bet for many investors.
For investors who seek long-term savings with moderate risk, a large-cap-focused fund carries a sense of security. Large-cap stocks are well-established companies with a long performance record and, therefore, less volatile than their small company counterparts. Still, the Mahindra Manulife Focused Fund also provides exposure to a select few lower-market-cap names, which helps optimize returns without a significant increase in risk.
According to market regulator SEBI, focussed funds are supposed to maintain a portfolio of not more than 30 stocks. That may sound like a small number of holdings, but that’s all the fund manager needs for selectively prepared portfolios. Since there are only a limited number of stocks that go into the making of a portfolio, the fund can focus on high-quality investments sans the risk of over-diversification.
Even with the relatively small number of stocks, focused funds such as Mahindra Manulife Focused Fund could still have diversification by picking up stocks from different sectors and market caps. This will lead to a well-structured portfolio capturing growth opportunities with effective risk management.
Mahindra Manulife Focused Fund presents the ideal balance for investors with an average risk appetite. The heavy large-cap portfolio instills stability into the scheme, while a selection of mid and small-cap stocks opens up an opportunity to realize bigger returns. The combination is fairly attractive to long-term financial goals, such as retirement savings, combining growth with less risk.
With the heady markets of today, when mid and small-cap stocks are beginning to appear stretched, a large-cap-biased fund like Mahindra Manulife Focused Fund could be a relatively safe choice for long-term investing. Consequently, this focused fund may be considered an addition to any portfolio with its focused approach and cautious stock selection.
