Do Not Solely Go By Past Returns When Selecting Schemes

Kshitiz Mahajan: What I have learned is that there is enough food for everyone. All these new players, they are coming with a big bang. We are a young, tech-savvy nation. More than 60 crore of our population is under 40, and these all-new, low-cost offerings which are coming, they are more on the tech side, on the AI side… They are saying let’s cut human intervention.

So, somebody who’s into fixed deposit or recurring deposit accounts, they are looking at participating in equity, and index is a good way of participating in equity….you can easily make 11-12% through index fund route.

And then, they are cutting the cost because cost is one element which obviously over a period of time, can actually pull down or drag the return down.

…So, there are many such new businesses which are coming with low-cost index funds, which are coming with factor-based funds, and there is enough scope for them to grow.

Many new clients coming to the industry, they don’t want 40-50 stocks to analyse, they want to focus on different products and different style of things.

So, a couple of AMCs have thought of having their one flagship fund and they are just focusing on that fund only, let’s say the PPFAS or Quant Mutual Fund. They are very clear that’s how they want to grow. They have their flagship strategy, value-based theme… and their clients also are liking that they are not diverging into so many other funds.

At our end also, whenever we are talking to anyone, we also always say that let’s keep it short, rather than just diversifying. End of the day, you over-diversify when you invest in too many schemes. That also drags your returns down.

You don’t have to have so many schemes. So, these low-cost offerings which are coming,… they are getting some allocation on their side.

…There is a thought wherein they are going for factor-based funds also, which is the best of both worlds. You have passive management and active management. You take the middle way, you take the best of both worlds.

You eliminate a few factors, you keep a few factors, momentum on let’s say high dividend or whatever strategy you want to and you go for those types of funds also.

So, they are getting some allocation on both sides, and I see that both strategies–the active management… and the passive management, and the new which is low cost as well as factor-based strategy is going to coexist. So yes, that can be looked at also.