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. 

Reason for recommendation 

Investing in mutual funds during periods of record-high equity markets can pose challenges, but opting for welldiversified funds can offer a prudent approach. Diversification here transcends within equity to encompass different asset classes, aiming to provide stability and smoother returns by avoiding concentration in a single asset class. Multi-asset mutual fund invest in a blend of stocks (equities), bonds (debt), and additional asset classes like real estate investment trusts (REITs), gold, or commodities. An exemplary choice in this context is the ICICI Prudential Multi-Asset Fund. This fund boasts an impressive long-term return history, delivering an annualised return of 21.37 percent since its inception in October 2002. Even in shorter durations, the fund has comfortably surpassed the category average returns. Over the past year, it achieved a remarkable return of 30.92 per cent, outstripping the category average of 28.58 per cent. This trend persists over longer periods, with the fund consistently exceeding its category averages: 23.16 per cent over three years, 20.26 per cent over five years, and 17.48 per cent over 10 years. Such consistent outperformance underscores the fund’s ability to generate significant returns over the long term, distinguishing it as a standout performer within its category. 

Furthermore, the fund maintains a well-diversified allocation among different asset classes. As of January 2024, equity constituted 58 per cent of the total assets under management (AUM), with commodities at 14.1 per cent, debt at 12.13 per cent, and cash and cash equivalents at 14.49 per cent. Even within equities, the fund leans towards Large-Cap stocks, comprising around 80 per cent of the equity portfolio. The fund is suited for investors with longer term horizon. These funds are designed to weather market cycles and potentially yield more consistent returns over time.