Fund of Fortnight

This is our mutual fund recommendation. Every fortnight, we recommend one open-ended equity diversified fund that has the best potential of returns for the next one year considering its constituents remain the same. [EasyDNNnews:PaidContentStart]

Reason for recommendation
The last five months have doled out a horrifying experience for many investors. Most of the equity indices are down by more than 15 per cent, except for a few. Stocks are performing even worse and are down by more than 20 per cent. Nonetheless, there is one segment of the market that is falling less and outperforming others. These are companies with lower volatility. Hence, out choice of MF Select in this issue is ICICI Prudential Nifty 100 Low Volatility 30 ETF FOF. 

This is a factor mutual fund and its strategy is passive, meaning it aims to replicate the performance of the underlying index. It does this by investing in the same stocks that make up the Nifty 100 Low Volatility 30 index in the same proportion. This index is less susceptible to sharp price swings, which can be particularly appealing during times of market uncertainty. 

This is reflected in the fund’s performance. Over shorter periods, the fund has outperformed, notably in the one-month and three-month periods, showing fewer negative returns during market downturns. For example, in last three months, it is down by less than 1 per cent compared to the 8.56 per cent fall witnessed by the category. Over the longer term, the fund has shown positive signs, exceeding the category average in the one-year period and maintaining a comparable return over the three-year horizon. 

In the three-year period, the fund is up by 14.12 per cent annually while the category average is 13.78 per cent. This suggests that the fund’ low volatility strategy may offer some downside protection in shorter periods, but its long-term performance is more closely aligned with the broader market trends. The fund is well-suited even for high-risk investors in the current market scenario with an investment horizon of more than one year.

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